It has been about a month since the last earnings report for Carrier Global (CARR). Shares have added about 1.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Carrier Global due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Carrier Q1 Earnings Beat Estimates
Carrier Global reported first-quarter 2023 adjusted earnings of 52 cents per share, which surpassed the Zacks Consensus Estimate by 6.1%. The figure decreased by 3.7% year over year.
Net sales of $5.3 billion came ahead of the Zacks Consensus Estimate of $5 billion. Further, the figure increased by 13% year over year.
Strong momentum across HVAC and Fire & Security segments drove top-line growth.
However, softness in the Refrigeration segment was a concern.
Product sales (88.9% of net sales) of $4.7 billion increased 12.4% year over year. Service sales (11.1% of net sales) of $587 million were up 21.3% year over year.
HVAC revenues (68.7% of net sales) increased 22% year-over-year to $3.6 billion. Well-performing light commercial and commercial HVAC businesses contributed well.
Refrigeration revenues of $898 million (17% of net sales) were down 8% from the year-ago quarter’s level. The slowdown in container sales and orders was a major concern. Softness in commercial refrigeration was a concern.
Fire & Security revenues (16.5% of net sales) of $869 million were up 6% year over year. Nevertheless, solid momentum among access solutions, strength in the commercial fire business and growing momentum in the Americas and Asia remained positives.
Research & development (R&D) expenses increased 11.2% year over year to $139 million. Selling, general & administrative (SG&A) expenses grew 20% from the year-ago quarter’s level to $721 million.
As a percentage of revenues, R&D expenses contracted 10 basis points (bps) from the prior-year quarter’s level, but SG&A expenses expanded 80 bps year over year.
Adjusted operating margin contracted 190 bps on a year-over-year basis to 12.2%.
Adjusted operating margin of the HVAC segment contracted 260 bps year over year to 13.5%. The
The Refrigeration segment reported an adjusted operating margin of 12.4%, expanding 90 bps.
Adjusted operating margin of Fire & Security was 12.4%, contracting by 190 bps year over year.
As of Mar 31, 2023, Carrier had cash and cash equivalents of $3.35 billion compared with $3.52 billion on Dec 31, 2022.
Total debt (including the current portion) at the end of the reported quarter was $8.9 billion compared with $8.8 billion at the end of the previous quarter.
In the reported quarter, Carrier generated $120 million in cash from operations, down from $1.1 billion in the prior quarter.
Capital expenditure was $70 million in the first quarter of 2023. Free cash flow was $50 million for the reported quarter.
For 2023, Carrier reaffirmed its guidance. It expects sales of $22 billion.
Carrier anticipates adjusted earnings per share within $2.50-$2.60.
Carrier expects an adjusted operating margin of 14% and free cash flow of $1.9 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, Carrier Global has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Carrier Global has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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