Sign in Subscribe

Carrier Global Corp - $CARR - Earnings Analysis: Strong organic growth in Q4, driven by HVAC segment.

By sagebytes in Business —

Business Model

Carrier generates revenue through the sale of products and services across its HVAC and Refrigeration segments, serving homes, buildings, and the cold chain. They are also expanding into digitally enabled lifecycle solutions and integrated systems.

Revenue Sources

  • Product sales: HVAC systems (residential, commercial, light commercial), refrigeration equipment (truck, trailer, container)
  • Service sales: Aftermarket parts, maintenance contracts, digital solutions (LYNX platform, Sensitech)
  • Integrated Systems: Home energy management, data center cooling (Quantum Leap), cold chain solutions

Income Statement Analysis

  • Net sales increased by 19.3% due to organic growth and acquisitions, but was offset by divestitures.
  • Operating profit increased significantly, driven by the Commercial Refrigeration gain and overall operating performance.
  • The company had significant tax expense driven by internal business reorganizations, impacting Earnings from Continuing Operations.

Balance Sheet Analysis

  • Cash and cash equivalents decreased significantly due to acquisitions and share repurchases.
  • Goodwill increased substantially due to the acquisition of Viessmann Climate Solutions.
  • Long-term debt decreased due to debt paydown.
  • Total Liabilities decreased and total equity increased.

Cash Flow Analysis

  • Operating cash flow decreased due to changes in operating assets and liabilities.
  • Investing cash flow was significantly negative due to investment in businesses, net of cash acquired.
  • Financing cash flow was negative due to repayment of debt and share repurchases.
  • Overall cash and cash equivalents decreased due to investment and financing activities.

Capital Allocation

Carrier allocated capital to strategic acquisitions (Viessmann Climate Solutions), debt repayment, and shareholder returns (dividends and share repurchases). They are projecting approximately $3.8B in capital returns through dividends and share repurchases. The company repurchased approximately $1.9B shares and plans to repurchase ~$3 billion in shares in 2025.

Management Commentary

We capped a transformational year for Carrier with robust fourth quarter financial results including 6% organic growth, significant adjusted operating profit margin expansion of 370 basis points and 50% adjusted EPS growth.

We are well-positioned to deliver strong results in 2025, reinforced by our growing global commercial HVAC backlog supported by the acceleration in data centers, commitment to double-digit aftermarket growth, and leading positions across our businesses.

Commercial Refrigeration divestiture represents a ~$750 million sales headwind versus prior year

Overall Sentiment: Positive, emphasizing strong results, portfolio transformation, and strategic positioning for future growth. Cautious of headwinds from divestitures.

Recommendation

Rating: Hold

Reason for Rating: The company's strong Q4 performance and positive outlook for 2025 are balanced by the challenges of integrating a major acquisition and managing economic uncertainty. While strategic positioning is good, execution is key.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/12/2025, 12:23:54 AM