HVAC giant Lennox Int'l (LII 211.36, +4.11, +2.0%) trades lockstep with its two major moving averages after this morning’s upbeat guidance update failed to impress.
Specifically, LII announced 2019 financial guidance and
updated 2018 guidance to reflect earlier receipt of insurance proceeds than had
been anticipated by previous guidance. The insurance proceeds relate to a July
2018 tornado that damaged the company's Iowa manufacturing facility and
For 2018 and 2019 overall, the company expects to receive approximately $347 mln in insurance proceeds, inclusive of approximately $124 mln in 2018 and the remaining $223 mln in 2019. On a GAAP basis, the company expects a pre-tax gain of approximately $132 mln in non-core earnings over 2018 and 2019 due to the difference in book and replacement value of assets.
For 2018 on a core basis for the Residential business segment, the company received $27 mln, or $0.51 per share, of insurance proceeds in the fourth quarter to cover lost profits from business interruption in the third quarter of 2018; these proceeds were previously expected in 2019. The core impact for lost profits in 2018 still to be offset by insurance recovery in 2019 is now approximately $38 mln compared to prior guidance of $65 mln.
For 2019 on a core basis for the Residential business segment, the company continues to expect approximately $35 mln of tornado impact and now expects approximately $73 mln of insurance recovery after the $27 mln that was paid in 2018, a timing shift of $0.51 from 2019 to 2018 guidance.
Updated 2018 financial guidance:
- Reiterates 2018 guidance for revenue growth of 2-4% on a GAAP basis and 4-6% on an adjusted basis, which excludes the impact of the divestitures of the company's Australia, Asia and South America Refrigeration businesses in 2018.
- Updates 2018 guidance for adjusted EPS from continuing operations from $8.70-$9.10 to $9.21-$9.61.
- Reiterates 2018 guidance for corporate expenses of approximately $85 mln.
- Updates 2018 guidance for the effective tax rate from 22-24% to approximately 23% on an adjusted basis for the full year.
- Updates 2018 guidance for capital expenditures to approximately $125 mln, including $25 mln in 2018 related to the Iowa manufacturing facility, funded by insurance proceeds.
2019 financial guidance:
- Sees revenue growth of 3-7%.
- Adjusted EPS from continuing operations of $12.00-$12.60.
- Corporate expenses of approximately $90 mln.
- Effective tax rate of 22-23% on an adjusted basis for the full year.
- Capital expenditures of approximately $215 mln, including $115 mln in 2019 to complete the reconstruction of the Iowa manufacturing facility, funded by insurance proceeds.
LII is slated to release Q4 results sometime in early February, though an exact date has yet to be confirmed. It appears investors may have already spent their optimism on the December 3 all-time high of $230.66 and, even further back, on the stock’s recovery from the company’s Q3 miss (dated October 22), when the stock gained 20.9% from the post-report 12-month lows of $177.36. Today’s guidance is ahead of the market’s views on both counts (FY18 and FY19), but the stock is being held down by technical resistance in the 50-day simple moving average (210.51) and the 200-day (209.78).