Contrasting Armstrong World Industries (NYSE:AWI) and Lennox International (NYSE:LII)

Armstrong World Industries (NYSE:AWI) and Lennox International (NYSE:LII) are both industrials companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, analyst recommendations, risk, institutional ownership, valuation, dividends and profitability.

Institutional & Insider Ownership

98.9% of Armstrong World Industries shares are owned by institutional investors. Comparatively, 67.1% of Lennox International shares are owned by institutional investors. 1.2% of Armstrong World Industries shares are owned by company insiders. Comparatively, 9.8% of Lennox International shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Armstrong World Industries and Lennox International’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Armstrong World Industries	18.60%	37.35%	17.06%
Lennox International	14.61%	66.42%	19.16%

Analyst Ratings

This is a breakdown of recent recommendations for Armstrong World Industries and Lennox International, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Armstrong World Industries	0	4	4	2	2.80
Lennox International	2	9	5	0	2.19

Armstrong World Industries currently has a consensus target price of $213.25, indicating a potential upside of 21.66%. Lennox International has a consensus target price of $546.58, indicating a potential upside of 38.94%. Given Lennox International’s higher probable upside, analysts clearly believe Lennox International is more favorable than Armstrong World Industries.

Risk & Volatility

Armstrong World Industries has a beta of 1.16, suggesting that its stock price is 16% more volatile than the S&P 500. Comparatively, Lennox International has a beta of 1.19, suggesting that its stock price is 19% more volatile than the S&P 500.

Dividends

Armstrong World Industries pays an annual dividend of $1.36 per share and has a dividend yield of 0.8%. Lennox International pays an annual dividend of $5.44 per share and has a dividend yield of 1.4%. Armstrong World Industries pays out 18.6% of its earnings in the form of a dividend. Lennox International pays out 24.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Armstrong World Industries has raised its dividend for 1 consecutive years and Lennox International has raised its dividend for 16 consecutive years. Lennox International is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Armstrong World Industries and Lennox International”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Armstrong World Industries	$1.62 billion	4.57	$308.70 million	$7.30	24.01
Lennox International	$5.20 billion	2.62	$805.80 million	$22.12	17.78

Lennox International has higher revenue and earnings than Armstrong World Industries. Lennox International is trading at a lower price-to-earnings ratio than Armstrong World Industries, indicating that it is currently the more affordable of the two stocks.

Summary

Lennox International beats Armstrong World Industries on 11 of the 18 factors compared between the two stocks.

About Armstrong World Industries

Armstrong World Industries, Inc., together with its subsidiaries, engages in the design, manufacture, and sale of ceiling and wall solutions in the Americas. It operates through Mineral Fiber and Architectural Specialties segments. The company offers mineral fiber, fiberglass wool, metal, wood, felt, wood fiber, and glass-reinforced-gypsum; ceiling component products, such as ceiling perimeters and trims, as well as grid products that support drywall ceiling systems; ceilings, walls, and facades for use in commercial settings; and manufactures ceiling suspension system (grid) products. It serves commercial and residential construction markets, as well as renovation of existing buildings sectors. The company sells its products to resale distributors, ceiling system contractors, wholesalers, and retailers comprising large home centers. Armstrong World Industries, Inc. was founded in 1860 and is headquartered in Lancaster, Pennsylvania.

About Lennox International

Lennox International Inc., together with its subsidiaries, designs, manufactures, and markets a range of products for the heating, ventilation, air conditioning, and refrigeration markets in the United States, Canada, and internationally. The Home Comfort Solutions segment provides furnaces, air conditioners, heat pumps, packaged heating and cooling systems, indoor air quality equipment, comfort control products, and replacement parts and supplies; residential heating, ventilation, cooling equipment, and air conditioning; and evaporator coils and unit heaters under Lennox, Dave Lennox Signature Collection, Armstrong Air, Ducane, AirEase, Concord, MagicPak, Advanced Distributor Products, Allied, Elite Series, Merit Series, Comfort Sync, Healthy Climate, iComfort, ComfortSense, and Lennox Stores name. The Building Climate Solutions segment offers unitary heating and air conditioning equipment, applied systems, controls, installation and service of commercial heating and cooling equipment, variable refrigerant flow commercial, curb, curb adapters, drop box diffusers, HVAC recycling, and salvage service. This segment also provides condensing units, unit coolers, fluid coolers, air cooled condensers, air handlers, and refrigeration rack systems for preserving food and other perishables; and compressor racks and industrial process chillers under the Lennox, Model L, CORE, Enlight, Xion, Energence, Prodigy, Strategos, Raider, Lennox VRF, Lennox National Account Services, Allied Commercial, Elite, AES Industries, Mechanical, and Reclaim, Heatcraft Worldwide and Chandler Refrigeration, Bohn, MAGNA, Larkin, FriguaBohn, IntelliGen, and Interlink brand name. In addition, the company provides small package units, rooftop units, chillers, air handlers, and fan coils. It sells its products and services through direct sales, distributors, and company-owned parts and supplies stores. The company was founded in 1895 and is headquartered in Richardson, Texas.