CARR Carrier Global
Solid HVAC franchise, but today’s price already discounts clean execution and margin recovery.
The story
Carrier is a global HVAC and climate-solutions franchise refocusing around higher-quality heating, cooling, controls, and energy-transition demand after portfolio reshaping. The moat is real but moderate: installed base, distribution, brand, and scale help, while cyclicality, competition, and Viessmann integration limit pricing power. It is a mature industrial with some above-GDP growth from electrification, heat pumps, efficiency retrofits, and data-center cooling, not a long-duration hypergrowth compounder.
I am trimming near-term growth from 6.5% to 5.0% and sales-to-capital from 1.3 to 1.0 because the Riello sale and tighter climate focus reduce reported growth while the recent 0.85 sales-to-capital and Viessmann integration argue for less efficient reinvestment than previously assumed. Margins remain near the prior 13.5% target, but I shade them to 13.0% because current TTM margin is only 8.6% and sustainable HVAC industrial economics should not assume peak execution. Risk stays close to the industry anchor, with leverage and integration risk offset by scale and diversified end markets.
Value drivers
| Revenue growth (Y1) | 5.0% |
| Terminal growth | 3.0% |
| Forecast horizon | 7y |
| Target operating margin | 13.0% |
| Years to target margin | 7 |
| Sales-to-capital | 1.00 |
| Beta | 1.10 |
| Failure probability | 1.5% |
| Cost of capital (WACC) | 9.1% |
| Terminal WACC | 8.8% |
Valuation bridge
| PV of explicit FCFF | 7.22B |
| PV of terminal value | 20.71B |
| Equity value | 17.06B |
| ÷ shares → per share | $20.54 |
News
neutral +0.10 · 8 articles
- Carrier (CARR) Stock Looks Fully Priced As Focus Shifts After Riello Sale
- Carrier (CARR) Completes Riello Sale As It Tightens Focus On Climate And Energy
- Get Paid 11% A Year To Hold TT Stock You Already Own
- Is Carrier Global Corporation (CARR) among the Best HVAC Stocks to Buy for AI Server Heat Mitigation?
- 3 Profitable Stocks with Questionable Fundamentals
- AirJoule Unveils Prime System, Clearing Path to Commercialization
- Comfort Systems' Backlog Boom: Can It Overcome Execution Challenges?
- 1 Mooning Stock Worth Investigating and 2 We Find Risky
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 22.96B | 5.0% | 9.2% | 1.83B | 1.09B | 739.85M | 677.99M |
| 2 | 24.04B | 4.7% | 9.8% | 2.05B | 1.07B | 978.71M | 821.88M |
| 3 | 25.08B | 4.3% | 10.5% | 2.28B | 1.04B | 1.23B | 950.23M |
| 4 | 26.08B | 4.0% | 11.1% | 2.51B | 1.00B | 1.51B | 1.06B |
| 5 | 27.04B | 3.7% | 11.7% | 2.75B | 956.26M | 1.79B | 1.16B |
| 6 | 27.94B | 3.3% | 12.4% | 2.99B | 901.20M | 2.09B | 1.24B |
| 7 | 28.78B | 3.0% | 13.0% | 3.24B | 838.12M | 2.40B | 1.30B |
Key risks
- Viessmann integration costs and synergy shortfalls keep margins below target
- HVAC replacement demand weakens if rates stay high or commercial construction slows
- Leverage limits flexibility if cash conversion disappoints
Catalysts
- Successful Viessmann integration with visible margin recovery
- Capital recycling from divestitures reduces debt and sharpens the climate-solutions story