Lennox International (LII) has reported steadily expanding net margins, rising from 7.9% in Q4 2024 to 11.3% in Q4 2025. This margin improvement has been driven by the company's ability to pass through pricing increases to customers and drive operational efficiencies throughout its business. The data indicates LII's margin expansion is not a one-time event, but rather a consistent trend. Over the last four quarters, the company has demonstrated a net margin ramp from 7.9% to 8.9% to 10.5% to 11.3%. This suggests LII has meaningful pricing power and a focus on continuous improvement that should allow the margin expansion to continue. Alongside the margin improvement, LII has also grown its free cash flow (FCF) from $81.0M in Q4 2024 to $470.0M in Q4 2025. The combination of rising margins and strong FCF generation provides LII with ample financial flexibility to invest in growth initiatives, pursue strategic acquisitions, and return capital to shareholders. Given LII's track record of margin expansion, pricing power, and FCF generation, I believe the company is well-positioned to continue delivering shareholder value. While the stock is not cheap at 24.2x forward P/E, the fundamentals support further upside. I see LII stock reaching $250 over the next 6-12 months as the market recognizes the company's margin expansion potential.

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