Carrier Global Corp (CARR) Reports Strong 2023 Results and Sets Positive 2024 Outlook
Revenue: 2023 sales reached $22.1B, marking an 8% increase over 2022, with organic growth contributing 3%.
Net Income: GAAP net income stood at $1.3B, with adjusted net income at $2.3B.
Earnings Per Share (EPS): GAAP EPS rose to $1.58, while adjusted EPS climbed to $2.73, reflecting strong profit growth.
Free Cash Flow: Free cash flow surged by 53% to $2.1B, demonstrating robust cash generation capabilities.
Gross Margin: Gross margins improved by 210 basis points compared to the previous year.
2024 Outlook: Carrier anticipates sales of ~$26.5B with mid-single digit organic growth and an adjusted EPS of $2.80 - $2.90.
On February 6, 2024, Carrier Global Corp (NYSE:CARR) released its 8-K filing, detailing a year of strong financial performance and setting an optimistic outlook for 2024. Carrier, a global leader in intelligent climate and energy solutions, has demonstrated resilience and strategic foresight in navigating market challenges and capitalizing on growth opportunities.
Company Overview
Carrier Global manufactures a wide range of products, including heating, ventilation, and air conditioning (HVAC), refrigeration, and fire and security systems. The company serves both residential and commercial markets, with a sales mix of 60% commercial and 40% residential in its HVAC segment. Carrier's refrigeration segment includes transportation refrigeration and supply chain monitoring, while its fire and security business offers fire detection and suppression, as well as access controls and intrusion detection products. In a significant strategic move, Carrier announced plans to divest its fire and security and commercial refrigeration businesses and has also announced the acquisition of Germany-based Viessmann for approximately $13 billion.
Financial Performance and Challenges
Carrier's financial results for 2023 reflect a company in transformation, achieving an 8% increase in sales and a significant expansion in operating margins. The company's adjusted operating margin expanded by 80 basis points, while GAAP EPS and adjusted EPS saw increases of 53% and 33%, respectively. Despite flat organic sales growth in the fourth quarter, Carrier managed to offset declines in North America Residential & Light Commercial HVAC sales with growth in Commercial HVAC globally. The Refrigeration segment also saw a return to growth, with organic sales up 6%.
However, Carrier faced challenges, including a 1% decline in HVAC segment sales and a 1% drop in Fire and Security organic sales. These challenges underscore the importance of Carrier's strategic decisions to divest certain businesses and focus on areas with stronger growth prospects.
Financial Achievements
The company's financial achievements are particularly noteworthy in the context of the construction industry, where margins can be tight and cash flow management is critical. Carrier's improved gross margins and substantial free cash flow increase are testaments to its operational efficiency and strategic investments. These achievements are crucial for Carrier as it continues to innovate and lead in its market segments while also providing the financial flexibility to pursue strategic acquisitions and divestitures.
Key Financial Metrics
Carrier's financial strength is further evidenced by its balance sheet and cash flow statements. The company ended the year with a robust cash and cash equivalents balance of $10.015 billion, a significant increase from the previous year's $3.520 billion. This financial position enables Carrier to reduce debt, as indicated by its plans to use approximately $4.5 billion in net proceeds from business exits for debt reduction.
"Our fourth quarter results continue to show Carriers ability to perform while transforming with strong operating profit growth and EPS up over 30% compared to the prior year. For full-year 2023, we grew gross margins 210 basis points on 3% organic sales growth with both operating and free cash flow up about 50% compared to the prior year," said Carrier Chairman & CEO David Gitlin.
Analysis of Performance
Carrier's performance in 2023 is a clear indicator of its strategic focus and operational excellence. The company's ability to grow its gross margins and free cash flow amidst a challenging economic environment speaks to its strong market position and effective management. Looking ahead to 2024, Carrier's guidance suggests confidence in its ability to continue delivering solid organic growth and improved financial metrics.
As Carrier prepares for the future, its strategic divestitures and the acquisition of Viessmann Climate Solutions position it to capitalize on market trends and focus on its core strengths. With a solid backlog and a leadership position in sustainability, Carrier is poised for another year of strong financial performance.
For detailed financial tables and a complete analysis of Carrier's performance, visit the full 8-K filing.
Investors and stakeholders in the construction and climate solutions industries will find Carrier's latest financial results and future outlook to be a compelling narrative of a company successfully navigating through transformation and poised for continued growth.
Explore the complete 8-K earnings release (here) from Carrier Global Corp for further details.
This article first appeared on GuruFocus.
