Lennox International (LII) may face weaker residential volumes, elevated inventories, softer demand and pressure from higher prices through H2 and into 2027, though stronger light-commercial sales might offer some support, Morgan Stanley said Thursday in a report.

Lennox's residential heating, ventilation and air-conditioning business may fall short of market expectations as high distributor inventories prompt another round of destocking and weigh on shipments, while recent price increases might erode demand, the report said.

Morgan Stanley expects residential organic revenue to decline 7.2% in 2026, while light-commercial organic revenue may rise 16%, helped by recent acquisitions.

The firm lowered its 2026 EPS forecast to $23.06 from $23.85 as residential weakness limits growth.

Morgan Stanley cut its price target on Lennox stock to $375 from $450 and maintained its underweight rating.

Further pressure on the valuation would likely depend more on whether the company can sustain its pricing power than on additional volume weakness, the report said.

Price: 384.03, Change: +10.03, Percent Change: +2.68