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Carrier's (CARR) Q4 Earnings In-Line, Revenues Beat Estimates

Carrier Global CARR reported fourth-quarter 2022 adjusted earnings of 40 cents per share, which came in line with the Zacks Consensus Estimate. The figure decreased by 9.1% year over year.

Net sales of $5.1 billion surpassed the Zacks Consensus Estimate of $5.08 billion. However, the figure decreased by 1% year over year.

Softness in the Refrigeration and Fire & Security segments led to a year-over-year decline in the top line.

Nevertheless, the company witnessed strong momentum across the HVAC segment.

Product sales (88.7% of net sales) of $4.53 billion increased 6.4% year over year. Service sales (11.3% of net sales) of $578 million were down 34.1% year over year.

Carrier Global Corporation Price, Consensus and EPS Surprise

Carrier Global Corporation Price, Consensus and EPS Surprise
Carrier Global Corporation Price, Consensus and EPS Surprise

Carrier Global Corporation price-consensus-eps-surprise-chart | Carrier Global Corporation Quote

Segment Details

HVAC revenues (65% of net sales) increased 21% year over year to $3.32 billion. Residential sector strength in North America drove growth. Also, well-performing light commercial and commercial HVAC businesses contributed well.

Refrigeration revenues of $943 million (18.5% of net sales) were down 14% from the year-ago quarter’s level. The slowdown in container sales and orders was a major concern. Softness in commercial refrigeration was a concern.

Nevertheless, strong growth in European truck/trailer sales was a positive.

Fire & Security revenues (18.8% of net sales) of $960 million were down 33% year over year.

Nevertheless, growing momentum among access solutions and strength in the commercial fire business in the Americas remained positive.

Operating Results

Research & development (R&D) expenses increased 11.2% year over year to $149 million. Selling, general & administrative (SG&A) expenses fell 17.5% from the year-ago quarter’s level to $673 million.

As a percentage of revenues, R&D expenses expanded 30 basis points (bps) from the prior-year quarter’s level, but SG&A expenses contracted 270 bps year over year.

The adjusted operating margin contracted 10 bps on a year-over-year basis to 10.1%.

The adjusted operating margin of the HVAC segment expanded 60 bps year over year to 9.6%. The Refrigeration segment reported an adjusted operating margin of 12.1%, expanding 60 bps. Adjusted operating margin of Fire & Security was 14.5%, expanding by 60 bps year over year.

Balance Sheet

As of Dec 31, 2022, Carrier had cash and cash equivalents of $3.52 billion compared with $2.98 billion on Sep 30, 2022.

Total debt (including the current portion) at the end of the reported quarter was $8.8 billion compared with $8.9 billion at the end of the previous quarter.

In the reported quarter, Carrier generated $1.1 million in cash from operations, up from $790 million in the prior quarter.

Capital expenditure was $140 million in the fourth quarter of 2022. Free cash flow was $983 million for the reported quarter.

2023 Guidance

For 2023, Carrier expects sales of $22 billion. The Zacks Consensus Estimate for sales is pegged at $21.64 billion.

Carrier anticipates adjusted earnings per share within the range of $2.50-$2.60. The Zacks Consensus Estimate for the same is pegged at $2.53 per share.

Carrier expects an adjusted operating margin of 14%. CARR expects free cash flow of $1.9 billion.

Zacks Rank & Stocks to Consider

Currently, Carrier has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Computer & Technology sector are Agilent Technologies A, Arista Networks ANET and Asure Software ASUR, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Agilent has gained 8.4% in the past year. A’s long-term earnings growth rate is currently projected at 10%.

Arista Networks has gained 6.1% in the past year. The long-term earnings growth rate for ANET is currently projected at 17.5%.

Asure Software has gained 51.9% in the past year. The long-term earnings growth rate for ASUR is currently projected at 23%.

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