Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Carrier Global Corp (CARR, Financial) reported a 20% increase in organic orders compared to last year, indicating strong demand and positioning for future growth.
- The company achieved 4% organic sales growth, driven by strong performance in key verticals such as data centers and decarbonization-related infrastructure.
- Carrier Global Corp (CARR) delivered double-digit aftermarket growth for the fourth consecutive year, highlighting the success of its aftermarket strategy.
- The company repurchased approximately $400 million worth of shares in Q3 and plans to repurchase around $5 billion worth of shares by the end of next year, demonstrating a commitment to returning value to shareholders.
- Carrier Global Corp (CARR) is on track to complete its portfolio transformation by year-end, with the sale of its commercial refrigeration business already closed and the final divestiture of its commercial and residential fire business expected soon.
Negative Points
- Carrier Global Corp (CARR) faced continued headwinds in residential and light commercial HVAC markets in Europe and China, impacting overall sales growth.
- The company's adjusted operating margin was down 40 basis points in Q3, partly due to the deconsolidation of Visteon Climate Solutions, which represented a 130 basis point headwind.
- Preliminary free cash flow was an outflow of about $370 million in the quarter, impacted by cash taxes on business exit gains and transaction costs.
- The refrigeration segment experienced a decline in North America truck and trailer sales, down over 15%, contributing to a challenging market environment.
- Carrier Global Corp (CARR) adjusted its full-year sales expectation to $22.5 billion, reflecting a transition to discontinued operations for its Fire & Security exits, which impacted overall guidance.
Q & A Highlights
Q: Can you share your view on the bottoming process and timeline for the business, and how do you expect things to travel from a revenue standpoint into 2025?
A: David Gitlin, CEO, mentioned that while there have been many moving parts, the team is now in a rhythm of monitoring weekly orders, which translate into sales almost overnight. September orders were strong, up about 10%, and October orders have been even stronger. Although they are entering the season in Europe and Germany, where subsidies are starting to be paid, they are cautious about calling a bottom but feel optimistic about the recent trends.
Q: Are you expecting a pre-buy for the 410A refrigerant, and do you have the capacity to meet the demand?
A: David Gitlin, CEO, stated that they have the capacity to meet demand. They have communicated with distributors to determine the necessary inventory levels for the end of the year. While orders were strong in Q2 and Q3, they are focused on building the inventory needed for next year. They do not anticipate a material pre-delivery of 410A this year.
Q: Can you clarify the $0.10 delta on Slide 24 between the core and continuing operations EPS guide, and the operational tailwinds on Slide 25?
A: Patrick Goris, CFO, explained that the $0.10 difference is due to the allocation of headquarter charges to the Fire & Security segment and the treatment of interest expense in discontinued operations. The operational performance improvement of $0.40 in adjusted EPS for 2025 is consistent with previous guidance, excluding the Fire & Security segment.
Q: How are you looking at the light commercial business into next year, and any impact from the ESSER cliff?
A: David Gitlin, CEO, mentioned that they aim to end the year with balanced inventory levels. The ESSER funding has been beneficial, and the actual spend will continue throughout 2025. They have had significant wins in K-12 and other verticals, and while it's early to predict next year's performance, they are focused on managing inventory levels.
Q: Can you elaborate on the aftermarket 2.0 strategy and its potential impact?
A: David Gitlin, CEO, described the aftermarket 2.0 strategy as building on the fundamentals established in 2019-2020, with a focus on rotable pools, inventory management, and digital connectivity. The strategy aims to provide value-added services and improve margins, with modest investments required. The aftermarket is expected to drive double-digit growth and is integrated into the company's DNA.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
