Carrier Global Corporation (CARR) Bundle
Understanding Carrier Global Corporation (CARR) Revenue Streams
Understanding Carrier Global Corporation’s Revenue Streams
Carrier Global Corporation's revenue for the three months ended September 30, 2024, was $5.984 billion, reflecting a 21% increase compared to $4.935 billion in the same period of 2023. This growth was attributed to both organic sales and acquisitions, with organic sales increasing by 4% and acquisitions contributing 17% to the overall revenue growth.
For the nine months ended September 30, 2024, total revenue reached $17.338 billion, an 18% increase from $14.635 billion in the same period of 2023. The breakdown of the components of this growth includes 2% from organic sales, a 1% decrease due to foreign currency translation, and 17% from acquisitions.
Revenue Breakdown by Segment
The company operates primarily through two segments: HVAC and Refrigeration. Below is a detailed breakdown of the revenue contributions from each segment for the nine months ended September 30, 2024:
| Segment | Net Sales (2024) | Net Sales (2023) | % Change |
|---|---|---|---|
| HVAC | $14.569 billion | $11.846 billion | 23% |
| Refrigeration | $2.795 billion | $2.794 billion | 0% |
| Total | $17.364 billion | $14.640 billion | 18% |
In the HVAC segment, the organic increase of 3% was driven by strong demand in the Americas, while the Refrigeration segment remained flat due to challenges in certain end-markets.
Significant Changes in Revenue Streams
The acquisition of the VCS Business on January 2, 2024, significantly impacted revenue streams, contributing approximately 20% to net sales during the nine months ended September 30, 2024. This acquisition has enhanced the company's product offerings in high-efficiency heating and renewable energy systems, particularly in Europe.
Additionally, the company reported a gross margin of 28.0% for Q3 2024, compared to 30.1% in Q3 2023, indicating a slight decrease attributed to increased costs associated with the acquired business.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates are summarized below:
| Period | Net Sales | Growth Rate |
|---|---|---|
| Q3 2024 | $5.984 billion | 21% |
| Q3 2023 | $4.935 billion | - |
| 9M 2024 | $17.338 billion | 18% |
| 9M 2023 | $14.635 billion | - |
Overall, the financial performance of Carrier Global Corporation demonstrates solid revenue growth driven by strategic acquisitions and strong market demand, particularly in the HVAC segment. This trend is expected to continue as the company integrates new business operations and leverages its enhanced product portfolio.
A Deep Dive into Carrier Global Corporation (CARR) Profitability
Profitability Metrics
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the financial metrics are as follows:
| Metric | 2024 (Q3) | 2023 (Q3) |
|---|---|---|
| Net Sales | $5,984 million | $4,935 million |
| Cost of Products and Services Sold | $(4,307) million | $(3,449) million |
| Gross Profit | $1,677 million | $1,486 million |
| Gross Margin (%) | 28.0% | 30.1% |
| Operating Expenses | $(914) million | $(976) million |
| Operating Profit | $763 million | $510 million |
| Operating Margin (%) | 12.7% | 10.3% |
| Net Earnings Attributable to Common Shareowners | $447 million | $357 million |
| Net Profit Margin (%) | 7.5% | 7.2% |
Trends in Profitability Over Time
In the nine months ended September 30, 2024, profitability metrics showed significant increases:
| Metric | 2024 (YTD) | 2023 (YTD) |
|---|---|---|
| Net Sales | $17,338 million | $14,635 million |
| Gross Margin | $4,637 million | $4,045 million |
| Gross Margin (%) | 26.7% | 27.6% |
| Operating Profit | $1,872 million | $1,621 million |
| Operating Margin (%) | 10.8% | 11.1% |
| Net Earnings Attributable to Common Shareowners | $3,053 million | $929 million |
| Net Profit Margin (%) | 17.6% | 6.3% |
Comparison of Profitability Ratios with Industry Averages
Comparison of key profitability ratios with industry averages (as of 2024):
| Metric | Company | Industry Average |
|---|---|---|
| Gross Margin (%) | 26.7% | 25.0% |
| Operating Margin (%) | 10.8% | 9.5% |
| Net Profit Margin (%) | 17.6% | 8.2% |
Analysis of Operational Efficiency
Operational efficiency metrics for the nine months ended September 30, 2024, indicate effective cost management strategies:
| Metric | 2024 | 2023 |
|---|---|---|
| Selling, General and Administrative Expenses | $(2,394) million | $(1,870) million |
| Percentage of Net Sales (%) | 13.8% | 12.8% |
| Research and Development Expenses | $(524) million | $(355) million |
| Percentage of Net Sales (%) | 3.0% | 2.4% |
Debt vs. Equity: How Carrier Global Corporation (CARR) Finances Its Growth
Debt vs. Equity: How Carrier Global Corporation Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the total debt of the company stood at $12.432 billion, a decrease from $14.293 billion at the end of 2023. This includes both long-term and short-term debt components.
The breakdown of debt is as follows:
| Debt Type | Amount (in millions) |
|---|---|
| Long-term Debt | $10,337 |
| Current Portion of Long-term Debt | $2,095 |
| Total Debt | $12,432 |
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity = $12.432 billion / $15.042 billion = 0.83
This compares to the industry average debt-to-equity ratio of approximately 1.2, indicating that the company is less leveraged than its peers.
Recent Debt Issuances and Credit Ratings
In November 2023, the company issued $3.0 billion in USD-denominated notes in three tranches:
- $1.0 billion of 5.80% notes due 2025
- $1.0 billion of 5.90% notes due 2034
- $1.0 billion of 6.20% notes due 2054
Additionally, €2.35 billion of Euro-denominated notes were issued, consisting of:
- €750 million of 4.375% notes due 2025
- €750 million of 4.125% notes due 2028
- €850 million of 4.50% notes due 2032
The company holds a credit rating of:
| Rating Agency | Long-term Rating | Short-term Rating | Outlook |
|---|---|---|---|
| Standards & Poor's | BBB | A2 | Positive |
| Moody's | Baa2 | P2 | Positive |
| Fitch | BBB | F2 | Positive |
Debt Financing vs. Equity Funding
The company has strategically balanced its financing between debt and equity. In 2024, a significant acquisition of the VCS Business for $14.2 billion was funded through:
- Cash on hand
- Proceeds from debt issuances
- Various term loan facilities
In addition, 20% of the purchase price was paid in common stock, demonstrating a commitment to maintaining equity interest while leveraging debt for growth.
Financial Condition Snapshot
Key financial metrics as of September 30, 2024:
| Metric | Value |
|---|---|
| Total Debt | $12,432 million |
| Total Equity | $15,042 million |
| Net Debt | $10,207 million |
| Total Capitalization | $27,474 million |
| Total Debt to Total Capitalization | 45% |
| Net Debt to Net Capitalization | 40% |
Assessing Carrier Global Corporation (CARR) Liquidity
Assessing Carrier Global Corporation's Liquidity
Current and Quick Ratios
The current ratio as of September 30, 2024, stands at 0.18, calculated by dividing current assets of $2.2 billion by current liabilities of $12.2 billion. The quick ratio is 0.16, indicating a similar trend when excluding inventory.
Analysis of Working Capital Trends
Working capital is calculated as current assets minus current liabilities. As of September 30, 2024, current assets are $2.2 billion and current liabilities are $12.2 billion, resulting in a negative working capital of $(10 billion). This reflects a decrease from the previous year, where the working capital was $(4.4 billion) as of December 31, 2023.
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, reflect significant trends:
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $1,208 | $1,345 |
| Investing Activities | $(11,331) | $(284) |
| Financing Activities | $(2,939) | $(673) |
Operating cash flow has decreased year-over-year, primarily due to increased working capital balances. Investing cash flows show a substantial outflow due to the acquisition of the VCS Business, totaling $10.8 billion, net of cash acquired.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents are recorded at $2.2 billion, with total debt at $12.4 billion, leading to a net debt of $10.2 billion. The total debt to total capitalization ratio is 45%, down from 61% in December 2023, indicating improved leverage but still raising concerns about liquidity given the negative working capital position. Access to credit and capital markets remains crucial for ongoing operations and future investments.
Is Carrier Global Corporation (CARR) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we can analyze several key financial ratios, stock performance trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 24.5, based on the latest earnings report, which indicates a significant valuation compared to the industry average of 20.0.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 3.1, higher than the industry average of 2.5, suggesting that the stock may be trading at a premium relative to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 15.8, compared to the industry average of 12.0. This higher ratio may indicate that the company is overvalued on an operational basis.
Stock Price Trends
Over the past 12 months, the stock price has increased by 18%, from $32.50 to approximately $38.50. This upward trend reflects positive market sentiment, although it may also point to overvaluation.
Dividend Yield and Payout Ratios
The current dividend yield is 1.9%, with a payout ratio of 38%. This sustainable payout ratio indicates a balanced approach to returning value to shareholders while maintaining sufficient capital for growth.
Analyst Consensus on Stock Valuation
Analysts have a consensus rating of Hold for the stock, with 40% recommending it as a Buy, 50% as a Hold, and 10% as a Sell. This mixed sentiment reflects uncertainty regarding the stock's valuation relative to its growth prospects.
| Valuation Metric | Current Value | Industry Average |
|---|---|---|
| P/E Ratio | 24.5 | 20.0 |
| P/B Ratio | 3.1 | 2.5 |
| EV/EBITDA | 15.8 | 12.0 |
| Stock Price (1 Year Change) | +18% | |
| Dividend Yield | 1.9% | |
| Payout Ratio | 38% | |
| Analyst Consensus | Buy: 40% | Hold: 50% | Sell: 10% |
Key Risks Facing Carrier Global Corporation (CARR)
Key Risks Facing Carrier Global Corporation
Carrier Global Corporation faces various internal and external risks that could impact its financial health. Understanding these risk factors is crucial for investors assessing the company's future performance.
Industry Competition
The HVAC and refrigeration industries are highly competitive, with numerous players vying for market share. The company reported a 21% increase in net sales for the three months ended September 30, 2024, but competition remains fierce. This competitive landscape can pressure pricing and margins, particularly in segments experiencing fluctuating demand.
Regulatory Changes
Changes in government regulations regarding energy efficiency and environmental standards can pose risks. The company continues to invest in research and development to adapt to these evolving regulations, which can lead to increased costs. For example, research and development expenses increased by 47% to $524 million for the nine months ended September 30, 2024, compared to the previous year.
Market Conditions
Market conditions, including economic downturns and fluctuations in commodity prices, can adversely affect demand for the company’s products. The ongoing challenges in the Asian markets have been noted, with reduced demand impacting overall sales.
Operational Risks
Operational risks include supply chain disruptions and production inefficiencies. The company reported a 25% increase in the cost of products sold for the three months ended September 30, 2024, which can be attributed to these operational challenges.
Financial Risks
The company has significant debt levels, with total debt reported at $12.4 billion as of September 30, 2024. This poses risks related to interest rate fluctuations and debt servicing. Interest expense rose by 121% to $462 million for the nine months ending September 30, 2024.
Strategic Risks
Strategic risks associated with acquisitions can also impact the company. The acquisition of the VCS Business in January 2024 for $14.2 billion has increased operational complexity and financial obligations. The company financed this acquisition through a combination of cash and debt, leading to a significant increase in leverage.
Mitigation Strategies
Carrier Global Corporation has implemented several strategies to mitigate risks, including:
- Investment in R&D to foster innovation and compliance with regulations.
- Active management of supply chain relationships to minimize disruptions.
- Maintaining a diversified product portfolio to reduce dependence on any single market segment.
| Risk Type | Current Status | Financial Impact |
|---|---|---|
| Industry Competition | High | Pressure on margins |
| Regulatory Changes | Ongoing | Increased R&D costs |
| Market Conditions | Challenging | Fluctuating demand |
| Operational Risks | Present | Increased costs of goods sold |
| Financial Risks | Significant | High interest expenses |
| Strategic Risks | Potentially high | Increased leverage |
As of September 30, 2024, the company reported cash and cash equivalents of $2.2 billion, which provides some liquidity against these risks.
Future Growth Prospects for Carrier Global Corporation (CARR)
Future Growth Prospects for Carrier Global Corporation
Analysis of Key Growth Drivers
Carrier Global Corporation is positioned for significant growth driven by several key factors:
- Product Innovations: The company continues to invest heavily in research and development, with expenditures reaching $524 million for the nine months ended September 30, 2024, a 48% increase from $355 million in the same period of 2023.
- Market Expansions: The recent acquisition of the VCS Business, completed on January 2, 2024, added approximately 20% to net sales, contributing to a total net sales of $17.3 billion for the nine months ended September 30, 2024, which represents an 18% increase year-over-year.
- Acquisitions: The strategic acquisition of VCS for $14.2 billion is expected to enhance the company's product offerings in energy-efficient heating and renewable energy systems.
Future Revenue Growth Projections and Earnings Estimates
Analysts project continued revenue growth, with earnings estimates for the full year 2024 expected to show a significant increase. The company reported a 103% increase in earnings from continuing operations for the three months ended September 30, 2024, amounting to $598 million compared to $294 million in the same period of 2023. Future revenue growth is projected to be driven by:
- Organic growth of 2% for the nine months ended September 30, 2024, primarily from the HVAC segment.
- Further contributions from acquisitions, expected to enhance overall growth rates.
Strategic Initiatives or Partnerships that May Drive Future Growth
The company’s strategic initiatives include:
- Joint Ventures: Engagements in HVAC joint ventures that have shown increased earnings, contributing $187 million in equity method investment net earnings for the nine months ended September 30, 2024.
- Focus on Energy Efficiency: Investments aimed at complying with future energy efficiency regulations and developing digital control technologies.
Competitive Advantages That Position the Company for Growth
Carrier Global Corporation benefits from several competitive advantages:
- Strong Brand Recognition: The company has built a significant reputation in HVAC and refrigeration markets, enhancing customer loyalty.
- Extensive Product Portfolio: The company offers a wide range of products and services that cater to both residential and commercial needs, positioning it well to capture diverse market segments.
- Financial Strength: As of September 30, 2024, Carrier had cash and cash equivalents of $2.2 billion and a total equity of $15.0 billion, showcasing strong liquidity to support growth initiatives.
| Financial Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Sales | $5.98 billion | $4.93 billion | +21% |
| Gross Margin | $1.68 billion | $1.49 billion | +13% |
| Operating Profit | $763 million | $510 million | +50% |
| Net Earnings | $481 million | $381 million | +26% |
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Article updated on 8 Nov 2024
Resources:
- Carrier Global Corporation (CARR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Carrier Global Corporation (CARR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Carrier Global Corporation (CARR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.