Morgan Stanley analysts Joshua Pokrzywinski and Rajeev Lalwani said they believe the U.S. heating, ventilation, and air conditioning industry may be at a "now or never" moment for consolidation, noting that United Technologies (UTX) has started "negotiating in public" given CEO Greg Hayes' comments on his view on valuation, timing and a structure for any deal for its Carrier business. The analysts said they believe that antitrust concerns limit the discussion to two potential transactions, namely combining Carrier with Johnson Controls (JCI) or with Lennox (LII). While both scenarios could unlock value, they view the path to a deal as easier for Lennox and see United Technologies shares as "the best way to play" this consolidation theme. Including a Carrier transaction in their sum-of-the-parts valuation would point to a United Technologies share price of up to $170, versus their price target on the stock of $155, noted the analysts.

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.