Lennox Residential Revenue Rose 3% While Residential Profit Fell 18%. Here's What Dealers and Contractors Missed

Lennox's residential revenue rose 3% to $937 million last quarter. Its unit volume fell 3% anyway. And residential profit dropped 18% to $176 million. That gap is the whole story for anyone who sells comfort.

Lennox's top line went up. Almost everything under it went down.

Lennox's Home Comfort Solutions unit grew revenue 3% from a year earlier, to $937 million in the third quarter. That is a step up from a 7% drop in the second quarter and a 10% drop in the first. Look closer.

The volume of equipment it actually moved fell 3%. Acquisitions Lennox completed added 4% to volume, and a richer mix plus pricing chipped in 2%. Profit for the segment dropped 18%, to $176 million, and margin slid 490 basis points, to 18.7%. Strip out acquisitions and HCS revenue was down 1% for the quarter, after falling 9% in the second.

Across the entire company, results followed a similar shape. Total revenue rose 10% to $1.6 billion, while operating income fell 5% to $312 million and adjusted diluted per-share earnings declined 7% to $6.84. The commercial business carried the load: Building Climate Solutions revenue grew 24% to $635 million, with segment profit climbing 19% to $167 million.

Then came the guidance. For the full year, the company now expects residential revenue to fall about 4%, after telling investors in earlier quarters to expect growth of about 1%. It also cut its adjusted earnings-per-share outlook to $21 to $21.50, from $23 to $24.

Plain version for an owner: the company sold less equipment, bought part of its growth, and kept less of every dollar. If that pattern showed up on your P&L, you would not call it a good quarter.

The CEO said the quiet part out loud.

Alok Maskara, Lennox's CEO, said the commercial business kept growing fast and that "residential end-markets began stabilizing". Then he gave the other half: margins and results came in below the company's expectations, which he tied to heightened competitive pressure and persistent inflation on costs.

On the earnings call, Maskara said demand is still boxed in by what buyers can afford, mortgage rates that stay high, and general consumer worry.

Treat that list as a sales problem, not an economics lecture. My read: your customer is not rejecting comfort, a new roof or a new vehicle. They are rejecting the payment. That is a different objection, and it takes a different close.

Why this is happening now.

The second quarter was worse. HCS revenue dropped 7% then, and unit volume dropped 12%. The first quarter was worse still: residential volume was off 21% and revenue was off 10%.

New construction was the sore spot. Revenue from that market dropped roughly 30% in the second quarter, and Lennox said part of that came from its own decision to step back from new-construction work with thinner margins.

So the third-quarter improvement is real but thin, and the company is counting on more of it. Lennox had told investors to expect residential results to get better quarter by quarter through the back half of 2026, with the real recovery landing in 2027.

The pricing moves are the part to copy. Lennox aimed its pricing at specific regions and specific kinds of customers as it fought to hold and win back residential share. Sales made directly to contractors were down 6%, an improvement on the 12% slide in the second quarter, while two-step organic sales climbed 13%, helped by how much distributors had cleared out a year earlier.

My read: that is a manufacturer deciding one price for everybody is a losing strategy. If a company that size prices by region and customer type, a contractor running one flat list is overcharging in some neighborhoods and losing jobs in others.

What it means if you run a home services company.

Picture an HVAC company quoting a system replacement for a homeowner who is stretched thin. The manufacturer is adding side-discharge products to its entry-level line and building toward a four-step lineup — entry, good, better and best — with cheaper options for buyers who are up against affordability limits. That entry tier gets a wider launch in the first quarter of 2027.

Now the sales problem. My read: most comfort advisors are trained to sell up, and the factory is about to hand you a lower tier to sell down into. If your team can only present one option, the customer walks to whoever presents three. That is not a product problem. It is a script problem.

Picture a roofing or remodeling company in the same zip code. Same shopper, same tight budget, same hesitation. The lesson is not about air conditioners. It is that the buyer in front of you is choosing between doing the project and protecting a monthly payment. Whoever frames the payment wins the job.

What it means if you run a dealership.

Picture a car dealer on a Saturday. A family walks the lot, likes a vehicle, then asks the only question that matters: what is the payment. The demand constraint Lennox's CEO named — what buyers can afford, mortgage rates that stay high, and general consumer worry — is the same shopper standing on your showroom floor.

My read: when a manufacturer's CEO says affordability is holding demand back, the floor that leads with payment beats the floor that leads with features. And the desk that can show three tiers — base, mid, loaded — keeps the deal alive instead of watching it walk down the road.

How to use this week.

1. Sort your recent deals by tier. Open your quote log or your deal jackets and tag every deal as entry, mid or top. Do it once and you will see the pattern. If most of your quotes are top tier and most of your closes are not, you already know where the leak is.

1. Build a three-tier presentation. Write it once and use it on every quote: base, mid and best, with the payment for each. The point is not to sell the cheap one. The point is to keep the customer in the conversation instead of losing them to a number.

1. Segment your pricing by area and customer type. Lennox did exactly that in the third quarter. Pull a batch of recent jobs by neighborhood and by customer type. If you win everything in one area and nothing in another, your price is wrong in one of them.

1. Rewrite your follow-up for the not-right-now crowd. Affordability means timing, not rejection. A homeowner who says the timing is not right is a lead, not a loss. Put them on a regular follow-up schedule.

1. Ask your supplier what is coming in the entry tier. Lennox's wider entry-tier launch is set for the first quarter of 2027. Ask your rep the same question about your lines. You want to know what you will be selling before your competitor does.

1. Run the payment math out loud. Do not make the customer do it in their head while you watch. Hand them the number on paper and let them react to it.

1. Check your ad spend against the same reality. If leads are up and closes are down, the problem is not lead volume. It is what happens in the first few minutes of the appointment.

Here are a few scripts and a prep prompt you can use today.

Home services, comfort advisor talk track: Show three ways before one price — the same system at three levels, with the monthly number on each — then ask which one feels closest to where they want to be.

Car dealer, before the test drive: Show three ways the deal can look — base, mid, loaded — with the payment on each, then let them pick which one to drive.

Home services, prep prompt (not a customer script): Work out the main objections a homeowner will raise about an entry-level system when they came in wanting the top tier, and a plain-English answer for each.

Mistakes to avoid.

• Reading a 3% revenue gain as a recovery. Lennox's organic residential revenue was down 1% and its volume was down. Growth bought with acquisitions is not demand.
• Cutting price to chase volume. Lennox's margin fell 490 basis points to 18.7% while it fought for share, and pricing was one of the few things working in its favor. You can win the job and lose the year.
• Waiting for the market to come back. Lennox's CEO said the company's plan is not built on a big rebound in the market. Yours should not be either.
• One price list for every customer. Lennox priced by region and customer type in the third quarter. You should too.