Volatile stock to watch: Lennox International Inc. (NYSE: LII)

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Lennox International Inc. (NYSE: LII) stock rose over 1.5% on 21st October, 2019 (as of 11:28 am GMT-4; Source: Google finance) after the company posted mixed results for the third quarter of FY 19. Moreover, net cash from operations in the third quarter decreased to $236 million compared to $266 million in the prior-year quarter. Net cash used in investing activities rose to $25 million compared to $9 million in the prior-year quarter. Free cash flow decreased to $211 million compared to $253 million in the third quarter a year ago. The company posted the total debt at the end of the third quarter of $1.45 billion. At the end of September 2019, the company has generated total cash and cash equivalents of $46 million.

The company reported 15% rise in the total adjusted segment profit to a third-quarter record $175 million, and total adjusted segment margin expanded 140 basis points to a third-quarter record 17%. The company delivered the income from continuing operations for the third quarter of $114.7 million compared to $108.0 million in the prior-year quarter. For the third quarter, the company reported 2% increase in the gross profit to approximately $298 million and adjusted gross margin was 28.8%.

LII in the third quarter of FY 19 has reported the adjusted earnings per share of $3.34, missing the analysts’ estimates for the adjusted earnings per share of $3.39, as per Zacks Investment Research. The company had reported the adjusted revenue growth of 7 percent to $1.03 billion in the third quarter of FY 19, beating the analysts’ estimates for revenue of $1.02 billion. The adjusted revenue and profit exclude non-core Refrigeration businesses divested in 2018 and 2019.

Additionally, during the third quarter 2019, the company had repurchased $150 million of stock and has paid $30 million in dividends.

For the full year 2019, the company has revised adjusted revenue growth downwards from 2-5% to 2-4%. Similarly, the forecast for adjusted EPS from continuing operations has been revised downwards from $11.30-$11.90 to $11.15-$11.45. The corporate expenses is now expected to be approximately $85 million. The company has reiterated the guidance for an effective tax rate to be of 22-23% on an adjusted basis for the full year. The company has also reiterated the guidance for 2019 capital expenditures to be of approximately $155 million, including $55 million funded by insurance proceeds. The company has updated the guidance for free cash flow from approximately $390 million to $320 million for the full year. The company projects $400 million of stock repurchased in 2019.

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