Lennox Looks Richly Valued On Strong Sentiment For HVAC

While HVAC has proven to be a relatively popular end-market among investors, that hasn’t spared companies like Lennox (LII) or Trane (TT) in this recent downturn, as the HVAC market is proving that it too is not immune to pandemic-related declines. Lennox is one of the few companies so far to offer guidance for 2020 (most companies are pulling/suspending guidance), and this management team is estimating a 20% hit from COVID-19 to 2020 revenue.

While Lennox hasn’t been notably stronger than industrials in general this year, I nevertheless find today’s price/valuation too high. I appreciate that HVAC is a popular market with attractive long-term characteristics, but I think that’s true more of commercial HVAC than the U.S. residential market where Lennox is particularly strong. Although I can see Lennox as a potential M&A target, the valuation seems to already reflect that, and this is not one of my favored names.

Read more here:
Lennox Looks Richly Valued On Strong Sentiment For HVAC