Lennox reports 23% drop in residential unit volume

Lennox’s residential sales took a hit in the third quarter, dropping double digits year-over-year, the company reported Wednesday. 

What’s happening: Its residential division “experienced softer demand in the third quarter, with revenue declining by 12 percent, primarily due to a 23 percent decline in unit sales volumes,” CFO Michael Quenzer said on the company’s earnings call.

• He explained, “Contractors and distributors actively reduced inventory levels. Macroeconomic softness weighed on both new and existing home sales. Moderate weather dampened demand, and there was a clear shift towards system repairs rather than full replacements.”

Zoom in: CEO Alok Maskara suggested that the shift stemmed, in part, from dealer behavior, as contractors opted not to push replacements due to the A2L cylinder issues that plagued the industry earlier this year. 

• “They were just not comfortable selling a 454B unit when they were not sure if they would have a canister and be able to top off the system as required,” he said.
• “Contractors… also were holding inventory,” he added. “And in some cases, it was more than we thought… We have realized they have done some destocking as well.”

What we’re watching: While Maskara recognized today’s headwinds, he remarked that 2026 would be “brighter,” as inventory levels normalize, interest rates potentially go lower, triggering home sales, and the A2L transition wraps up. 

• “Things are no longer getting worse… and I’m starting to see some green shoots,” he noted. “We have moved from air conditioning to furnace season in many of the areas where the inventory generally was low. So there’s not that much destocking.”
• “And also,” he added, “I think some of the bad news around consumer confidence, tariffs, and all that’s kind of coming up in the rearview mirror.” 

Carrier, Trane, and nationwide distributor Watsco are set to report third-quarter earnings next week.