Lennox Riding High On HVAC Enthusiasm

Multi-industrials have had a good run of late on growing optimism around the post-pandemic recovery, or at least increasing confidence that the more bearish scenarios are unlikely to occur, but HVAC companies have done even better, with the worst performer over the past three months (Trane (TT)) still beating the broader industrial peer group, while Johnson Controls (JCI), Lennox (LII), and Carrier (CARR) have all done even better, with Carrier seeing a remarkable run.

While I've liked the HVAC segment on a relative basis, I definitely underestimated the enthusiasm that the market was going to have for these stocks when I last wrote about Lennox. Still, even with what I consider to be pretty bullish expectations - my 2020/2021 are on the high end of Street estimates, and my 2022/2023 are a little higher still on a relative basis - the valuation just really doesn't work unless you're willing to just assume that wherever the S&P 500 is is "fair" and build a premium on top of that.

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Lennox Riding High On HVAC Enthusiasm