Last Update11 Oct 25Fair value Decreased 1.30%
Carrier Global's analyst price target has been reduced from $77.18 to $76.18. Analysts cite a softer residential HVAC outlook and ongoing margin pressures as key factors behind the revision.
Analyst Commentary
Recent Street research highlights a range of views regarding Carrier Global's outlook, reflecting both confidence in its commercial operations and caution stemming from residential market challenges.
Bullish Takeaways- Bullish analysts point to robust growth in Carrier's commercial HVAC and aftermarket businesses. These areas are seen as key drivers for long-term upside into 2026 and beyond.
- Channel restocking is expected to be aggressive through year-end. Field inventory is projected at multi-year lows by the end of the fourth quarter.
- An upward price target revision by one firm signals positive sentiment around the company’s ability to deliver solid results and potentially increase 2025 earnings outlooks across the industrial sector.
- Bearish analysts note that Carrier’s U.S. residential HVAC sales are trending below prior expectations, contributing to revised earnings per share guidance for 2025 and creating near-term headwinds.
- Updated models reflect weaker residential volumes, which continue to weigh on valuation and investor confidence.
- There is concern over inflation-related pressures and heightened competition. This has led to increased inventory in the distribution channel and a mixed outlook for the upcoming quarters.
- Several analysts expect that current guidance may be lowered alongside third-quarter results, further highlighting market uncertainty.
What's in the News
- Carrier will showcase its QuantumLeap suite of AI-driven thermal management solutions for data centers at Data Centre World Asia on October 8-9. The company will debut liquid cooling for the first time in Asia (Key Developments).
- The company introduced a major upgrade to its Abound Insights platform. The update adds advanced AI-powered features for building operations, including interactive maps, weather and air quality overlays, and streamlined reporting tools (Key Developments).
- Carrier has begun the first field trials of battery-enabled HVAC systems to explore how homes can serve as flexible Distributed Energy Resources. These systems support grid resilience by shifting energy use from on-peak to off-peak times (Key Developments).
- Carrier is the first HVAC manufacturer to complete the U.S. Department of Energy's Commercial Building HVAC Technology Challenge validation. The company exceeded performance and efficiency benchmarks for its rooftop heat pump system (Key Developments).
- Carrier reaffirmed its 2025 earnings guidance, projecting sales of $23.0 billion for the period (Key Developments).
Valuation Changes
- Consensus Analyst Price Target has decreased slightly from $77.18 to $76.18.
- The discount rate has risen modestly, moving from 8.64% to 8.68%.
- Revenue growth projection has edged down from 4.89% to 4.83%.
- Net profit margin estimate has decreased from 11.30% to 11.11%.
- Future P/E ratio forecast has increased slightly from 24.52x to 24.68x.
Key Takeaways
- Carrier's innovation in sustainable energy and data center solutions is poised to capture growing demand, boosting future revenue and market share.
- Operational efficiencies and strategic acquisitions, like the Viessmann acquisition, are set to enhance margins, strengthen revenue streams, and improve profitability.
- Challenges in specific regions, tariff risks, and currency headwinds threaten Carrier Global's revenue and profitability, alongside underperformance in certain business segments.
Catalysts
About Carrier Global- Provides intelligent climate and energy solutions in the United States, Europe, the Asia Pacific, and internationally.
- Carrier's introduction of differentiated products, such as air-cooled commercial heat pumps and the integration of HEMS technology with Google Cloud's AI, positions them to capture the growing demand for sustainable and smart energy solutions, potentially driving future revenue growth.
- The company's strong performance in the aftermarket space, with double-digit growth and increased attachment rates on chillers, is expected to bolster net margins through high-margin service offerings and customer retention.
- Carrier's strategic expansion into the data center cooling market, including the development of integrated quantum leap cooling systems, sets the stage for substantial future earnings growth through an increase in market share and capitalizing on the high-demand sector.
- The company's efforts in operational efficiency, such as using Carrier Excellence to enhance productivity and mitigate tariff impacts through cost containment and supply chain adjustments, are likely to support margin expansion and improved earnings per share.
- Projected strong growth across residential and commercial HVAC segments in Europe, supported by favorable government climate goals and subsidies, alongside cost synergies from the Viessmann acquisition, are positioned to enhance Carrier's revenue streams and profitability.
Carrier Global Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Carrier Global's revenue will grow by 5.9% annually over the next 3 years.
- Analysts assume that profit margins will increase from 6.8% today to 10.9% in 3 years time.
- Analysts expect earnings to reach $2.9 billion (and earnings per share of $3.61) by about September 2028, up from $1.5 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $2.4 billion.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 26.6x on those 2028 earnings, down from 35.2x today. This future PE is greater than the current PE for the US Building industry at 23.0x.
- Analysts expect the number of shares outstanding to decline by 5.15% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.61%, as per the Simply Wall St company report.
Carrier Global Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The CSA segment's organic sales were partially offset by weaker performance in Climate Solutions Asia, Middle East, and Africa, indicating potential challenges in these regions which could undermine revenue growth.
- The light commercial business experienced a sharper decline than expected, primarily due to softer demand in small and medium businesses and delayed K-12 funding, potentially affecting total revenues.
- The exposure to tariffs, especially the remaining $300 million unmitigated, poses a risk that could impact net margins if pricing strategies fail to compensate fully.
- Despite overall positive results, foreign currency headwinds negatively impacted growth by approximately 1%, suggesting that exchange rate fluctuations could affect earnings.
- The European segment's low operating margin of 9% and legacy RLC business performance challenges pose risks to achieving planned margin improvements, potentially affecting overall profitability and earnings.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $82.902 for Carrier Global based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $100.0, and the most bearish reporting a price target of just $65.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $26.7 billion, earnings will come to $2.9 billion, and it would be trading on a PE ratio of 26.6x, assuming you use a discount rate of 8.6%.
- Given the current share price of $63.47, the analyst price target of $82.9 is 23.4% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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