Carrier Global released robust second-quarter results, exceeding earnings expectations with a significant increase year over year. The adjusted earnings per share of 87 cents outperformed the Zacks Consensus Estimate by 2.35% and climbed by 10.1% over the previous year.
The company’s net sales stood at $6.68 billion, showing an 11.6% jump compared to the same period last year despite missing the Zacks Consensus Estimate by 5.13%. Product sales, which constituted 89.8% of net sales, recorded $6 billion, marking a 12.1% increase over the previous year. Service sales, accounting for 10.2% of net sales, reached $685 million, reflecting a 7.5% year-over-year growth.
Quarterly Overview
The Heating, Ventilation, and Air Conditioning (HVAC) segment revenue totaled $4.97 billion, contributing 74.3% to net sales. Despite a slight miss in estimates, HVAC revenues soared by 17.9% compared to the previous year.
Segment Performance
Refrigeration revenues of $973 million recorded a slight year-over-year increase of 0.1% and represented 14.5% of net sales. Fire & Security revenues, amounting to $871 million, decreased by 6.5% year over year, constituting 13% of net sales.
Research & development expenses rose by 23.8% year over year to $187 million, with R&D expenses increasing by 30 basis points as a percentage of revenues. Selling, general & administrative expenses surged by 24.4% to $975 million, with SG&A expenses representing a 150 basis point increase as a percentage of revenues.
Notably, Carrier’s adjusted operating margin expanded by 140 basis points, reaching 18.9% year over year. In the HVAC segment, the adjusted operating margin increased by 120 basis points to 19.9%. The Refrigeration segment reported an adjusted operating margin of 12.1%, a 10 basis point contraction from the prior year, while Fire & Security’s adjusted operating margin of 17.8% expanded by 310 basis points.
Financial Position
By the end of the second quarter in 2024, Carrier held $2.91 billion in cash and cash equivalents, compared to $1.31 billion in the previous quarter. Total debt by June 30, 2024, amounted to $13.32 billion, down from $16.89 billion in March 2024.
Operating cash flow surged from $40 million in the previous quarter to $700 million in the reported quarter. Capital expenditure was noted at $111 million, resulting in a free cash flow of $549 million.
Future Outlook
For the full year of 2024, Carrier expects sales to exceed $25.5 billion, with an anticipated adjusted operating margin of 15.5%. Earnings per share are estimated between $2.80 and $2.90, targeting a free cash flow of around $0.4 billion.
Stock Analysis
Carrier Global holds a Zacks Rank #3 (Hold). The company’s shares have seen a 14.8% increase year to date, slightly below the 18.6% rise of the Computer and Technology sector.
Investors seeking alternatives might consider better-performing stocks such as Arista Networks (Zacks Rank #1), Apple (Zacks Rank #2), and Cognizant Technology Solutions (Zacks Rank #2) in the broader sector.
Arista Networks, recording a 38.4% gain this year, is set to announce its second-quarter results on Jul 30. Apple and Cognizant Technology Solutions are expected to reveal their third-quarter fiscal 2024 and second-quarter 2024 results on Aug 1 and Jul 31, respectively.
