On Monday, Citi upgraded shares of Carrier Global (NYSE:CARR) from Neutral to Buy, setting a price target of $74.00. The firm believes that Carrier Global is nearing the completion of its transformation, which is expected to position the company as a pure-play HVAC entity with an improved valuation multiple by entering 2025.
The upgrade reflects Citi's confidence in Carrier Global's ability to navigate through known challenges, such as the anticipated weakness in its Viessmann business, which accounts for roughly a mid-teens percentage of the company's FY24E revenue. Citi suggests that the negative impact of Viessmann could be substantially mitigated by synergies from the Viessmann partnership and broader productivity initiatives.
Citi also forecasts that Carrier Global's core markets are likely to experience mid-single-digit growth in the coming years. This projection is based on the bottoming out of the U.S. residential and global transport sectors, coupled with persistent strength in the commercial HVAC market. The firm acknowledges that while Carrier Global's journey towards improvement may not be linear, the company's efficient management and dominant market share in a preferred end market indicate potential for further growth.
In his statement, the Citi analyst noted, "Our upgrade reflects several key assumptions: 1) CARR will be done/mostly done with its transformation entering 2025, leading to an alternative pure play HVAC company with an improving multiple; 2) Viessmann weakness is a known headwind, and CARR synergies related to Viessman/wider productivity initiatives could largely compensate/offset; 3) Core CARR markets should grow mid-single digits over the next (at least) couple years as US Resi/global transports bottom while Commercial HVAC remains strong."
Overall, Citi's revised outlook for Carrier Global is based on the anticipation of the company completing its transformation and leveraging market growth opportunities, despite facing industry headwinds. The raised price target to $74 from the previous level reflects Citi's assessment of the company's earnings potential and strategic initiatives.
In other recent news, Carrier Global Corporation has made significant strides in its strategic transformation. The company recently completed the sale of its security business, Global Access Solutions, to Honeywell (NASDAQ:HON) for $4.95 billion. This move is part of Carrier's broader effort to focus on its core businesses, with plans to utilize the proceeds from this and future sales to reduce its debt.
Moreover, Carrier's financial results for the first quarter of 2024 indicate a robust performance. The company reported a 17% increase in sales to $6.2 billion and a 44% rise in adjusted operating profit to $927 million. The company's earnings per share also grew by 19%, demonstrating its continued momentum.
In an effort to streamline operations, Carrier is progressing with business exits, with definitive agreements for three out of four planned exits. The company expects to resume share repurchases in 2024. These developments are part of Carrier's ongoing commitment to addressing environmental challenges while maintaining a customer-centric approach.
InvestingPro Insights
Following Citi's upgrade of Carrier Global (NYSE:CARR), a closer look through InvestingPro's lens reveals additional insights that may interest investors. Carrier Global has demonstrated a commitment to shareholder returns, having raised its dividend for four consecutive years. This aligns with the company's expectation of net income growth this year, which is underscored by the fact that 9 analysts have revised their earnings estimates upwards for the upcoming period, signaling confidence in the company's financial outlook.
InvestingPro Data shows Carrier Global with a market capitalization of $56.66 billion and a P/E ratio of 43.06, which reflects a premium valuation in the market. However, the adjusted P/E ratio for the last twelve months as of Q1 2024 is slightly lower at 39.22, and the company has achieved a revenue growth of 9.35% during the same period. The dividend yield stands at 1.21%, suggesting a balance between growth and shareholder returns.
For investors seeking a deeper dive into Carrier Global's performance and future prospects, there are additional InvestingPro Tips available on their platform. Using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of analytical tools and data to inform their investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.