Lennox International (NYSE:LII) and AAON (AAON) Critical Survey

Lennox International (NYSE: LII) and AAON (NASDAQ:AAON) are both construction companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, risk, profitability, valuation, analyst recommendations, dividends and institutional ownership.

Insider and Institutional Ownership

69.5% of Lennox International shares are held by institutional investors. Comparatively, 66.2% of AAON shares are held by institutional investors. 3.9% of Lennox International shares are held by company insiders. Comparatively, 22.3% of AAON shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Dividends

Lennox International pays an annual dividend of $2.04 per share and has a dividend yield of 1.2%. AAON pays an annual dividend of $0.26 per share and has a dividend yield of 0.8%. Lennox International pays out 29.4% of its earnings in the form of a dividend. AAON pays out 27.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Lennox International has raised its dividend for 5 consecutive years. Lennox International is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Lennox International and AAON’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Lennox International 7.92% 1,821.73% 16.81%
AAON 13.61% 25.76% 20.11%

Risk & Volatility

Lennox International has a beta of 1.14, suggesting that its share price is 14% more volatile than the S&P 500. Comparatively, AAON has a beta of 0.96, suggesting that its share price is 4% less volatile than the S&P 500.

Valuation & Earnings

This table compares Lennox International and AAON’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Lennox International $3.80 billion 1.86 $550.10 million $6.95 24.08
AAON $383.64 million 4.54 $89.26 million $0.95 34.84

Lennox International has higher revenue and earnings than AAON. Lennox International is trading at a lower price-to-earnings ratio than AAON, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current recommendations for Lennox International and AAON, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lennox International 1 6 2 0 2.11
AAON 0 0 1 0 3.00

Lennox International presently has a consensus target price of $177.00, suggesting a potential upside of 5.75%. AAON has a consensus target price of $30.00, suggesting a potential downside of 9.37%. Given Lennox International’s higher possible upside, analysts plainly believe Lennox International is more favorable than AAON.

Summary

Lennox International beats AAON on 10 of the 17 factors compared between the two stocks.

Lennox International Company Profile

Lennox International Inc. is a provider of climate control solutions. The Company designs, manufactures and markets a range of products for the heating, ventilation, air conditioning and refrigeration (HVACR) markets. It operates through three segments: Residential Heating & Cooling; Commercial Heating & Cooling, and Refrigeration. It manufactures and markets a range of furnaces, air conditioners, heat pumps, packaged heating and cooling systems, equipment and accessories to manage indoor air quality, comfort control products, replacement parts and supplies and related products for both the residential replacement and new construction markets in North America. It manufactures and sells unitary heating and cooling equipment used in light commercial applications, such as low-rise office buildings, restaurants, retail centers, churches and schools. It manufactures and markets equipment for the global commercial refrigeration markets under the Heatcraft Worldwide Refrigeration name.

AAON Company Profile

AAON, Inc. is engaged in the engineering, manufacturing, marketing and sale of air conditioning and heating equipment consisting of standard, semi-custom and custom rooftop units, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps and coils. Its products serve the commercial and industrial new construction and replacement markets. Its rooftop and condensing unit markets consist of units installed on commercial or industrial structures of less than 10 stories in height. Its air handling units, self-contained units, geothermal/water-source heat pumps, chillers, packaged outdoor mechanical rooms and coils are applicable to all sizes of commercial and industrial buildings. The replacement market consists of products installed to replace existing units/components that are worn or damaged.

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