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Lennox Hikes Dividend 20% Amid Robust HVAC Demand

Lennox International Inc. (LII) designs, manufactures, and markets a broad range of heating, ventilation, air conditioning, and refrigeration products. The company sells these products through multiple distribution channels and offers different brands at various price points worldwide.

The company generated 65% of its sales from Residential Heating & Cooling, 21% from Commercial Heating & Cooling, and 14% from Refrigeration during the first quarter of 2021. In addition, 88% of its sales came from the United States, 7% came from Canada, and 5% came from other international sources during the quarter.

Strong Demand Drives Earnings

Lennox reported first-quarter revenue that rose 28.6% to $930.5 million, beating consensus estimates by $139.75 million, with non-GAAP earnings of $2.27 per share, beating consensus estimates by 95 cents per share.

The NAHB’s Remodeling Market Index came in at 86 during the first quarter compared to just 48 during the first quarter of 2020. At the same time, single-family home starts remain near their highs for the year, driving demand for HVAC and related equipment.

Analysts have been bullish on the stock following the first-quarter financial results, but some are concerned about its high valuation. For example, Vertical Research analyst Jeffrey Sprague downgraded the stock from Hold to Sell with an unchanged $300 per share price target.

The company raised its quarterly dividend by 19.5% to $0.92 per share, representing a 1.13% forward yield. The dividend is payable on July 15, 2021, to shareholders on record as of June 30, 2021.

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