This report does not constitute a rating action. The U.S.-based heating, ventilation, and air conditioning sales (HVAC) manufacturer disclosed that North American residential HVAC sales were down about 30%, however the decline was largely offset by strong growth in its commercial segment. The sharp drop in residential sales appears to be consistent across the industry with peers Lennox International Inc. (BBB/Stable/A-2) and Trane Technologies plc (BBB+/Positive/A-2) also reporting continued declines in residential revenues for the quarter. We attribute the decline to economic uncertainty and persistently low sales of existing homes. It is not uncommon for buyers of previously owned homes to replace HVAC systems within a year or two of move in. though we now estimate it could exceed 3x
