Financial Performance Overview

Carrier Global Corporation, a leading provider of heating, ventilation, air conditioning (HVAC), and refrigeration solutions, has reported its financial results for the three and nine months ended September 30, 2024. The company’s performance demonstrates a mix of growth and strategic portfolio changes during this period.

Revenue and Profit Trends

For the three months ended September 30, 2024, Carrier’s net sales increased by 21% to $6.0 billion compared to the same period in 2023. This growth was driven by a 4% increase in organic sales, as well as a 17% contribution from acquisitions and divestitures, primarily the acquisition of the VCS Business in January 2024.

The company’s gross margin increased by 13% to $1.7 billion, though as a percentage of net sales, it decreased by 210 basis points to 28.0%. This was due to the impact of inventory step-up, backlog amortization, and intangible asset amortization related to the VCS Business acquisition.

Operating expenses, including equity method investment net earnings, decreased by 6% to $914 million. This was primarily due to lower acquisition and divestiture-related costs, partially offset by higher selling, general, and administrative expenses associated with the VCS Business.

Carrier’s operating profit increased by 50% to $763 million, driven by the higher sales and improved productivity, which offset the impact of the VCS Business acquisition-related costs.

For the nine months ended September 30, 2024, Carrier’s net sales increased by 18% to $17.3 billion, with a 2% organic increase and a 17% contribution from acquisitions and divestitures. Gross margin increased by 15% to $4.6 billion, but decreased as a percentage of net sales by 90 basis points to 26.7% due to the VCS Business acquisition impact.

Operating expenses increased by 14% to $2.8 billion, primarily due to higher selling, general, and administrative costs related to the VCS Business. Operating profit increased by 15% to $1.9 billion.

Segment Performance

Carrier has two operating segments: HVAC and Refrigeration.

The HVAC segment reported a 26% increase in net sales for the three months ended September 30, 2024, driven by a 6% organic increase and a 20% contribution from acquisitions and divestitures, primarily the VCS Business. Operating profit in the HVAC segment decreased by 3%, as the benefits of higher sales and productivity were offset by the impact of the VCS Business acquisition.

For the nine months ended September 30, 2024, the HVAC segment’s net sales increased by 23%, with a 3% organic increase and a 20% contribution from acquisitions and divestitures. Operating profit decreased by 4%, primarily due to the impact of the VCS Business acquisition.

The Refrigeration segment reported a 1% increase in net sales for the three months ended September 30, 2024, driven by a 1% organic increase. Operating profit in the Refrigeration segment increased by 2%, primarily due to improved productivity and pricing, partially offset by volume reductions in certain end-markets.

For the nine months ended September 30, 2024, the Refrigeration segment’s net sales were flat compared to the prior year period, with a 1% organic increase. Operating profit decreased by 2%, primarily due to divestiture-related costs and the impact of lower volumes in certain end-markets.

Strengths and Weaknesses

Carrier’s key strengths during this period include:

1. Successful integration of the VCS Business acquisition, which contributed significantly to revenue growth.
2. Continued focus on productivity initiatives and pricing improvements, which helped offset inflationary pressures and volume declines in certain end-markets.
3. Strong performance in the HVAC segment, particularly in the Americas and EMEA regions, driven by improved end-market demand.

Potential weaknesses or challenges include:

1. The impact of the VCS Business acquisition on gross margin, as the recognition of acquired assets at fair value resulted in higher inventory step-up, backlog amortization, and intangible asset amortization costs.
2. Reduced end-market demand in Asia, particularly in China, which impacted the HVAC and Refrigeration segments.
3. Ongoing inflationary pressures and supply chain challenges, which continue to affect certain business operations.

Outlook and Future Prospects

Carrier’s strategic initiatives and portfolio transformation efforts are expected to continue shaping the company’s future performance. The successful completion of the divestiture of the Commercial and Residential Fire (CRF) business and the Commercial Refrigeration (CCR) business will allow Carrier to focus on its core HVAC and Refrigeration segments.

The acquisition of the VCS Business is expected to strengthen Carrier’s position in the European HVAC market, providing access to high-efficiency heating and renewable energy systems. The integration of this business and the realization of synergies will be crucial for Carrier’s future growth and profitability.

Carrier’s continued investment in research and development, as well as its focus on productivity improvements and pricing initiatives, are expected to help the company navigate the challenging market conditions and maintain its competitive edge.

However, the company’s performance will still be subject to the broader economic and industry trends, including the impact of inflation, supply chain disruptions, and changes in end-market demand. Carrier’s ability to effectively manage these factors and execute its strategic plans will be crucial for its long-term success.

Conclusion

Carrier’s financial performance for the three and nine months ended September 30, 2024, demonstrates a mix of growth and strategic portfolio changes. The company’s revenue and profit trends were driven by the successful integration of the VCS Business acquisition, as well as ongoing productivity and pricing initiatives. While the VCS Business acquisition had a temporary impact on gross margin, Carrier’s overall operating performance remained strong, particularly in the HVAC segment.

Looking ahead, Carrier’s focus on its core HVAC and Refrigeration businesses, coupled with its strategic initiatives and continued investment in innovation, positions the company for future growth and success. However, the company will need to navigate the challenges posed by the broader economic and industry environment to fully capitalize on its strengths and opportunities.