Executive Summary

Q4 2024 delivered strong operational results: revenue $1.345B (+16% YoY; core +22%), operating income $245M (+32%), operating margin 18.2% (+220 bps), GAAP EPS $5.52 and adjusted EPS $5.60 (+54% YoY) .
Management attributed outsized Q4 strength to R‑410A prebuy ahead of the 2025 refrigerant transition (estimated +$125M revenue and +$1.00 EPS), pricing/mix, and factory productivity; they cautioned this will be a headwind to Q1 and create tough comps in Q4 2025 .
Segment performance was bifurcated: Home Comfort Solutions (HCS) revenue $887M (+25%) with margin up 550 bps to 21.7%; Building Climate Solutions (BCS) revenue $458M (+17%) with margin down 160 bps to 21.6% from new factory ramp and inefficiencies .
FY2025 guidance: core revenue ~+2%, adjusted EPS $22.00–$23.50, capex ~$150M, FCF $650–$800M; net debt/adjusted EBITDA at 0.6x provides balance sheet flexibility. Investor focus centers on prebuy unwind, 454B pricing realization, and BCS productivity benefits in 2H25 .
Additional Q4-period items: quarterly dividend declared at $1.15 (payable Jan 15, 2025) and inclusion in the S&P 500 in December 2024 .

What Went Well and What Went Wrong

What Went Well

Record profitability and margins: operating income reached $245M and adjusted segment margin expanded 250 bps to 18.4%, with management highlighting “record achievements” and improved cash conversion .
HCS outperformance from volume leverage, pricing excellence, and factory/product cost tailwinds; HCS margin rose 550 bps to 21.7% with notable growth in the 2‑step distributor channel .
Cash generation surged: Q4 operating cash flow $332M and FCF $273M (+50% YoY), with CFO citing 97% FCF conversion and net debt/adjusted EBITDA down to 0.6x .

What Went Wrong

BCS margin pressure from new factory ramp-up and existing facility inefficiencies (~$20M cost), despite revenue +17% and segment profit +9% .
2024 R‑410A prebuy creates transitory headwinds: pull-forward into Q4 will weigh on 1H25 (especially Q1), and Q4 2025 comps will be tougher; management emphasized uncertainty across rates, tariffs, and labor .
Corporate expense increased $13M YoY (adjusted), and inflation remains a 3% cost headwind (SG&A notably pressured), muting margin expansion assumptions in guidance .

Financial Results

Consolidated Summary

Metric	Q4 2023	Q3 2024	Q4 2024
Revenue ($USD Billions)	$1.1548	$1.4981	$1.3450
GAAP Diluted EPS ($)	$4.04	$6.68	$5.52
Adjusted Diluted EPS ($)	$3.63	$6.68	$5.60
Operating Income ($USD Millions)	$185.3	$303.3	$244.6
EBIT Margin %	—	20.2%	18.2%
Cash from Operations ($USD Millions)	$306.3	$452.1	$332.4
Free Cash Flow ($USD Millions)	$181.6	$411.7	$272.8

Notes:

Adjusted EPS reconciliation differences in Q4 2024 were minimal vs GAAP (loss on sale from previous dispositions ~$3.1M after tax) .
Sequential revenue and margin declines vs Q3 reflect normal seasonality plus prebuy dynamics management flagged in Q&A .

Segment Breakdown

Segment Metric	Q4 2023	Q3 2024	Q4 2024
HCS Revenue ($USD Millions)	$709.4	$1,032.8	$887.4
HCS Segment Profit ($USD Millions)	$115.0	$226.5	$192.6
HCS Segment Margin %	—	21.9%	21.7%
BCS Revenue ($USD Millions)	$390.0	$465.3	$457.6
BCS Segment Profit ($USD Millions)	$90.5	$105.9	$98.8
BCS Segment Margin %	—	22.8%	21.6%

KPIs and Cash Deployment

KPI	Q4 2023	Q3 2024	Q4 2024
Prebuy Impact (Revenue, $USD Millions)	—	—	~$125
Prebuy Impact (EPS, $ per share)	—	—	~+$1.00
Net Debt / Adjusted EBITDA (x)	—	—	0.6x
Capital Expenditure ($USD Millions)	$125.2	$41.2	$60.2
Share Repurchases ($USD Millions)	—	$13	$41

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Core Revenue Growth (%)	FY2025	Not provided	~+2% (mix from new refrigerant + low single-digit price/volume; prebuy headwinds in Q1 and Q4)	Initial
Adjusted EPS ($)	FY2025	Not provided	$22.00–$23.50	Initial
Capital Expenditures ($USD Millions)	FY2025	Not provided	~$150	Initial
Free Cash Flow ($USD Millions)	FY2025	Not provided	$650–$800	Initial
Strategic Investments ($USD Millions)	FY2025	Not provided	~$25 (IS, distribution, sales/marketing)	Initial
Productivity Savings ($USD Millions)	FY2025	Not provided	~$50 (factory ramp-down costs and material efficiencies)	Initial
Dividend ($ per share)	Q1 2025	—	$1.15 declared (payable Jan 15, 2025)	Declared

FY2024 actuals vs Q3 raised guidance for context:

FY2024 revenue $5.341B vs prior guide ~+10% revenue (qualitative), GAAP/adjusted EPS $22.54/$22.58 vs guide $20.75–$21.00, FCF $785M vs guide $575–$650M .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2024, Q3 2024)	Current Period (Q4 2024)	Trend
Refrigerant transition (R‑454B)	Q2: Low GWP transition advancing; AES integration; pilot units at Saltillo . Q3: Low GWP transition strengthened competitive edge .	Prebuy boosted Q4 ($125M revenue, ~$1 EPS); phaseout of 410A expected by Q2 2025 .	Transition accelerating; prebuy unwind in 1H25.
Pricing discipline	Q2: Pricing excellence driving HCS margins . Q3: Continued pricing/mix benefits .	Targeting ~10% price increase on 454B across ~70% of HCS revenue; dilutes to mid-single-digit mix lift for FY25 .	Pricing realization ramps through 2H25.
Factory ramp & productivity	Q2: Saltillo pilot units; slight margin dilution . Q3: Saltillo production started; margin impact continues .	Early revenue benefits; ~$20M ramp/inefficiency costs pressure BCS margins; larger productivity benefits in 2H25 .	Near-term margin drag; tailwinds expected 2H25.
AES integration	Q2/Q3: Ahead of schedule, contributing to BCS growth .	Continues to outperform; exceeding synergies and customer wins .	Positive execution continues.
Emergency replacement program	—	Pilot launch positive; volume gains expected, predominantly 2H25 .	New growth vector in BCS, back-end loaded.
Macro/tariffs/labor	—	Management flags uncertainty (rates, tariffs on China/Mexico, labor constraints); dual-sourcing and pricing as contingencies .	Risk monitoring and mitigation in place.
Cash conversion	Q3: Operating cash flow $452M; FCF $412M .	Q4 operating cash flow $332M; 97% FCF conversion; net debt/EBITDA 0.6x .	Structural improvement in working capital.
Heat pumps/Samsung JV	Q2: JV expanding heat pump penetration .	Broader heat pump portfolio supports energy-efficient demand .	Strategic positioning improved.

Management Commentary

CEO: “2024 was a remarkable year filled with record achievements… We successfully navigated the complex product transition to the new refrigerant while maintaining a disciplined approach to M&A.”
CFO: “We are pleased to report our eighth consecutive quarter of double-digit year-over-year adjusted EPS growth… customers prepurchased R‑410A equipment, which is estimated to have positively impacted revenue by $125 million and increased earnings per share by $1.”
CEO on priorities: Focus on digital customer experience, expanded heat pump offering (Samsung JV), parts/accessories attachment rates, and commercial emergency replacement to drive resilient margins and growth into 2026 .
CFO on capital deployment: “Free cash flow conversion rate of 97%… net debt to adjusted EBITDA at 0.6x… capex estimated at $150M in 2025; FCF $650–$800M.”

Q&A Highlights

Prebuy dynamics: ~$125M revenue and ~$1 EPS pulled into Q4; majority impacts Q1 (some into Q2); also creates tough comps in Q4 2025, with benefit normalizing in Q1 2026 .
454B pricing: ~10% average increase on new products; with ~70% of HCS revenue converting over the year, yielding mid-single-digit mix uplift; visibility expected mid-to-late Q2 .
BCS trajectory: Mid-single-digit volume growth with 1–2 points share gain from Saltillo; margin expansion weighted to 2H25 as ramp costs subside and productivity improves .
Inflation and costs: 3% inflation across ~$4B cost base, heavier in SG&A (healthcare, wages); pricing/mix and productivity expected to offset, with overall margins ~flat in FY25 .
Tariffs and supply chain: Reduced exposure to China (e.g., mini-splits via Samsung Korea) positions LII favorably if China tariffs rise; potential Mexico tariffs would be offset primarily by pricing short term and by production shifts longer term .

Estimates Context

S&P Global consensus estimates for Q4 2024 (EPS, Revenue, EBITDA, Target Price, Recommendation) were unavailable due to a data access limit on retrieval at this time. As a result, we cannot quantify beats/misses vs Street for Q4 2024 and have anchored narrative on company-reported actuals and management commentary [GetEstimates attempt error].

Metric	Actual Q4 2024	S&P Global Consensus	Surprise
Revenue ($USD Billions)	$1.3450	N/A	N/A
Adjusted Diluted EPS ($)	$5.60	N/A	N/A

Note: Wall Street consensus via S&P Global was unavailable at the time of analysis due to request limits; future updates should recheck SPGI access.

Key Takeaways for Investors

Transitory prebuy tailwind boosted Q4; expect a payback in 1H25 (Q1 most acute) and a tough Q4 2025 comp, followed by normalization into Q1 2026—position sizing around these inflection points is prudent .
Pricing realization on 454B (~10%) and mix uplift should support HCS margins in 2H25 as 410A sell-through concludes by Q2; monitor mid-Q2 for visibility on competitive pricing behavior .
BCS margin expansion is a 2H25 story as Saltillo productivity ramps and inefficiencies abate; emergency replacement initiative is a meaningful share gain lever into peak season (Q2–Q3) .
Cash conversion and balance sheet strength (0.6x net debt/EBITDA) create flexibility for opportunistic buybacks and disciplined M&A; expect capex > depreciation again in 2025, still supporting mid/high-80s FCF conversion .
FY2025 guide implies relatively flat margins (~19.4%) amid 3% cost inflation and specific $25M SG&A investments; upside could come from lower inflation or better HCS volume if rates decline .
Dividends remain supported ($1.15 quarterly) alongside S&P 500 inclusion, which may broaden the investor base and index demand through 2025 .
Without confirmed Street consensus, trading should focus on the narrative—prebuy unwind trajectory, 454B pricing adherence, and BCS productivity ramp—as near-term catalysts.

Citations:

LENNOX INTERNATIONAL INC (LII)·Q4 2024 Earnings Summary