On Monday, BofA Securities adjusted its stance on Carrier Global (NYSE:), elevating the stock from Underperform to Neutral. The firm also increased the price target to $72 from the previous $55, indicating a more favorable outlook for the company. This reassessment follows Carrier’s second-quarter adjusted earnings per share (EPS) of $0.87, surpassing the consensus estimate of $0.85.
Despite experiencing a plummet in Viessmann’s sales, which fell by 30% compared to expectations of a low double-digit decrease, Carrier managed to exceed earnings expectations. This performance was attributed to robust North American HVAC demand, which helped offset the disappointing results from Viessmann. In Q1, Viessmann’s sales had already underperformed, dropping by 12% against forecasts of a mid-single-digit decline, yet Carrier still delivered an adjusted EPS that was $0.12 higher than the consensus.
BofA Securities anticipates that Carrier will continue to meet earnings expectations despite the ongoing challenges faced by Viessmann, particularly as the company benefits from easier comparisons in the future. Carrier has also announced a share buyback program, which is expected to contribute positively to its earnings.
The upgrade reflects BofA Securities’ valuation of Carrier at 17 times the projected 2025 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), up from the previous multiple of 13.
Carrier Global Corporation has been in the spotlight with significant developments. The company reported a 10% year-over-year increase in adjusted EPS to $0.87 and a 35% surge in free cash flow to $550 million in the second quarter. Furthermore, Carrier announced plans for a multi-billion dollar share buyback and projected full-year sales to reach approximately $25.5 billion, with an adjusted EPS of $2.80 to $2.90.
Baird, a financial services firm, adjusted its price target for Carrier Global to $74, citing the underperformance of Viessmann, a key part of Carrier’s business. However, Baird maintains an Outperform rating on the stock, seeing potential for multiple expansions despite the company’s lower than expected third-quarter EPS guidance.
Carrier Global’s strategic moves, including portfolio reconfiguration and aggressive capital allocation, were highlighted by Baird as contributing factors to the company’s continued growth. These recent developments also include a collaboration with Viessmann Climate Solutions to leverage growth opportunities and synergies.
Despite the challenging residential market in Europe, Carrier is committed to its transformation journey, focusing on becoming a global leader in intelligent climate and energy solutions. Investments in connectivity, AI, and sustainable solutions remain central to the company’s strategy.
InvestingPro Insights
Carrier Global (NYSE:CARR) has shown resilience and strategic acumen in the face of industry challenges, as evidenced by its recent financial performance and strategic initiatives. According to InvestingPro data, Carrier boasts a substantial market capitalization of $60.28 billion, reflecting investor confidence in its market position. The company’s P/E ratio stands at 17.21, which, when combined with a PEG ratio of 0.34, suggests that Carrier is trading at a low price relative to its near-term earnings growth potential. This aligns with BofA Securities’ reassessment and their increased price target.
InvestingPro Tips reveal that Carrier has consistently rewarded shareholders, having raised its dividend for four consecutive years. This track record of returning capital to investors is an important consideration for those looking for stable income-generating investments. Additionally, Carrier is anticipated to maintain profitability, with net income expected to grow this year, which may provide further upside to the stock’s valuation.
For those interested in a deeper analysis, InvestingPro offers additional insights, including 15 more InvestingPro Tips for Carrier Global, which can be accessed at https://www.investing.com/pro/CARR. Readers looking to leverage these insights can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
Carrier’s strategic focus on becoming a leader in intelligent climate solutions, along with its financial strength and commitment to shareholder returns, positions it favorably for future growth. As the company continues its transformation into a pure-play HVAC entity, these factors are likely to remain key drivers of its success.
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