Following his quarterly channel checks, KeyBanc analyst Jeffrey Hammond views expectations for +MSD industry growth in Q2 as fully supported, and while share dynamics appear to be stabilizing, he still expects Lennox (LII) and Ingersoll-Rand (IR) to sustain outgrowth, but at a more moderate rate versus previous quarters. In addition, the analyst notes he received near-unanimous affirmation that midyear price increases are passing through without resistance, which signals positively for HVAC OEMs and distributors alike. Heading into quarterly results, Hammond favors Ingersoll-Rand, and is more cautious on Watsco (WSO) given concerns around its ability to deliver on margins versus raised expectations.

Wells Fargo analyst Joseph O'Dea lowered the firm's price target on Lennox to $520 from $545 and keeps an Overweight rating on the shares. A solid Q1 and full year raise still saw Lennox's stock down 2% vs. XLI down 80bps, the firm says. Wells thinks a lighter potential R454B tailwind in 2025 and M&A uncertainty overhang are two reasons. In the firm's view, growth potential remains compelling.

Baird raised the firm's price target on Watsco to $460 from $420 and keeps an Outperform rating on the shares. The firm said 1Q24 results missed on revenue/EPS but a strong gross margin carried the day in a seasonally less significant period, and from here, Baird sees accelerating price/mix and volume momentum driven by full OEM price realization, initial A2L rollout at higher pricing, and easy comps.

Consensus $19.72. Backs FY24 revenue up 7%, consensus $5.12B. Sees FY24 free cash flow $500M-$600M.