Leading global provider of innovative healthy, safe, sustainable, and intelligent building and cold chain solutions, Carrier Global Corporation (CARR - Get Rating) provides heating, ventilation, air conditioning (HVAC), refrigeration, fire, security, and building automation solutions. While the Palm Beach Gardens, Fla., company has faced significant challenges related to the supply chain crisis and rising raw material costs, it has emerged as a strong player. 

Nevertheless, its shares have dipped 16.5% in price over the past three months.

However, CARR reported impressive financial results in the last quarter driven by continued demand across each segment. It also made several strategic acquisitions and collaborations to boost its operational efficiency and growth across each segment. The stock has gained 22.3% over the past year, closing yesterday’s trading session at $45.5.

Here is what could shape CHGG’s performance in the near term:

Strategic Acquisition and Collaboration

This month, CARR entered a binding agreement to acquire Toshiba Corporation’s (TOSYY - Get Rating) ownership position in Toshiba Carrier Corporation (TCC), a joint venture with Carrier in variable refrigerant flow (VRF) and light commercial HVAC. The anticipated purchase would help CARR improve its position in one of the fastest-growing HVAC categories and scale its worldwide VRF product platform with leading and unique technology and the addition of a known brand to its portfolio.

Last month, CARR expanded its electrification capabilities with a new alliance with ConMet, which includes wheel-based power production, which absorbs energy that would otherwise be squandered during braking events. The agreement also advances CARR’s broader zero-emission transport refrigeration solutions, with electric choices available for the trailer, truck, and light commercial vehicle clients by the end of 2022, which will assist in meeting forthcoming emissions rules.

Strong Profitability

CARR’s 8.1% trailing-12-months net income margin is 25.6% higher than the 6.4% industry average. Also, its ROC, EBITDA margin, and ROA are 36.9%, 5.1%, and 23.2% higher than the respective industry averages. And its $2.24 billion in cash from operations is 990.9% higher than the $205.06 million industry average.

Stable Growth Prospects

The Street expects CARR’s revenues and EPS to rise 4.5% and 12.3%, respectively, year-over-year to $20.84 billion and $2.56.in fiscal 2023. In addition, CARR’s EPS is expected to rise at a 12% CAGR over the next five years. Also, the company has an impressive earnings surprise history; it topped the Street’s EPS estimates in each of the trailing four quarters.

Consensus Rating and Price Target Indicate Potential Upside

Of the 13 Wall Street analysts that rated CARR, four rated it Buy, and nine rated it Hold. The 12-month median price target of $55.85 indicates a 22.8% potential upside. The price targets range from a low of $50.00 to a high of $65.00.

POWR Ratings Reflect Solid Prospects

CARR has an overall B grade, which equates to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. CARR has a B grade for Stability, which indicates the stock has lower volatility than its peers.

Among the 54 stocks in the B-rated Industrial – Building Materials industry, CARR is ranked #23.

Beyond what I have stated above, we have graded CARR for Growth, Sentiment, Quality, Value, and Momentum. Get all CARR ratings here.

Bottom Line

CARR reported strong earnings results in the last reported quarter and continues to undertake exceptional growth strategies to boost its prospects. In addition, growing demand, the company’s strategic acquisitions, and excellent financials position the stock well to witness significant upside in the coming months. So, we think the stock could be an excellent addition to one’s portfolio.

How Does Carrier Global Corporation (CARR) Stack Up Against its Peers?

CARR has an overall POWR Rating of B, which equates to a Buy rating.  Check out these other stocks within the Industrial – Building Materials industry with A (Strong Buy) ratings: Huttig Building Products Inc. (HBP - Get Rating) and GMS Inc. (GMS - Get Rating).

Note that HBP is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.

CARR shares rose $0.06 (+0.13%) in premarket trading Monday. Year-to-date, CARR has declined -16.11%, versus a -7.26% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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