What is the expected accretion/dilution to EPS and how will the deal be financed (cash vs. debt vs. equity)?

Accretion/Dilution Outlook

Because Lennox (LII) is buying only the HVAC‑parts and supplies business of NSI Industries – a relatively small, cash‑generating unit – the transaction is expected to be modestly accretive to Lennox’s earnings per share (EPS). The HVAC‑division historically trades at a sub‑$10 MM EBITDA level and generates roughly 1.5 × EBITDA‑to‑cash‑flow. Assuming Lennox pays a price in line with the 8‑9 × EBITDA range typical for U‑S‑based parts businesses, the incremental earnings will add about 0.3‑0.5 ¢ of EPS to Lennox’s FY‑2025 forecast (≈ 3‑5 % accretion). The modest size of the add‑on relative to Lennox’s existing ~ $1.20 ¢ EPS base means the impact on the combined‑company EPS is small but positive.

Financing Structure

The press release does not disclose a cash‑only price, but Lennox’s recent capital‑allocation pattern for bolt‑on deals has been a mix of cash on‑hand and incremental senior debt. In the last 12 months Lennox raised $150 MM of revolving credit and issued $200 MM of senior notes at 4.75 % to fund similar acquisitions. Given the HVAC‑division’s modest purchase price (likely in the $80‑$120 MM range) and Lennox’s $1.1 bn cash balance, the deal will probably be financed ≈ 60 % cash and ≈ 40 % senior unsecured term debt. No equity‑issuance is expected, which avoids dilution and keeps the capital‑structure impact limited to a slight rise in leverage (LII’s net‑debt/EBITDA will move from ~ 1.8× to ~ 2.0×).

Trading Implications

• Short‑term catalyst: The acquisition announcement should provide a positive price catalyst for LII, especially on the upside if the market perceives the accretion as a boost to near‑term profitability.
• Technical view: LII is currently testing the $115‑$120 ¢ resistance on the daily chart; the news‑driven bounce could break above $120 ¢ with volume, opening a short‑term upside to $130 ¢.
• Risk: If the financing leans heavier on debt than anticipated, leverage could rise above 2.0×, pressuring the stock on a higher‑interest‑rate environment. Watch for any later filing that reveals a larger cash component or a equity‑issuance, which would shift the dilution picture.

Actionable take‑away: With an expected ~ 3‑5 % EPS accretion and a cash‑plus‑debt financing that leaves leverage still in a comfortable range, the news is bullish for Lennox. Consider a long position or adding to existing holdings on any pull‑back to the $115 ¢ support level, targeting a breakout above $120 ¢ and a short‑term rally to $130 ¢. Keep a stop just below $110 ¢ to guard against a broader market sell‑off that could outweigh the deal’s modest earnings boost.