Lennox Blows Hot… Then Cold (LII, HSY)

Lennox International, Inc. (NYSE:LII) cools and heats the buildings and supermarket display cases that house the popsicles and TV dinners that you regularly gorge upon.

But before we get to today’s Lennox deal, we have one to close for a very nice profit.

So, let’s at it—

It’s our HSY trade, whose details can be found HERE.

In sum, we’re holding two, short HSY November 17^th 190 CALLs and an $8.22 credit.

And…?

The short CALLs can be repurchased for $0.65 each.

And we say, DO IT!

That will give you a NET win of $1.32 on an initial debit of $5.60.

And that’s 23.5%.

And now we arrive at Lennox.

A quick word regarding fundamentals—

LII offered Q3 earnings last Thursday and the street went barmy over the results.  Both top and bottom lines beat analyst estimates, and as the chart below will show, the stock popped.

But first, take a peek at some fundamentals…

• P/E is 23.67, a number that’s a bit cheeky, in our view.
• Dividend Yield is 1.24%, and…
• Price to Book is a fantastic 79.93. How a company comes to trade at nearly 80x its break-up value is as mysterious to us as The Legend of the Grey Midget’s Knockwurst.  (Look it up…)
• Debt to Equity is equally disturbing at a mile-high 10.70(!), and…
• Despite the bullish buying spree, the latest round of earnings were actually DOWN 8.62% Q/Q. Go figure…

Here’s the daily chart—

But G-d in Heaven will decide.

May we see a great sanctification of His name.

With kind regards,

Hugh L. O’Haynew

Follow @HughLOHaynew