Carrier Global (CARR) Q4 2023 earnings summary

Executive summary

• Q4 sales were $5.102B, flat organically YoY; adjusted operating profit rose 8% to $557M and adjusted EPS rose 33% to $0.53.

• FY 2023 sales reached $22.1B, up 8% reported and 3% organically; adjusted operating margin was 14.5%, free cash flow was $2.138B and adjusted EPS was $2.73.

• Viessmann Climate Solutions was completed in January 2024; agreements were reached to sell Global Access Solutions and Commercial Refrigeration for close to $6B combined.

• Business-exit proceeds are planned for debt reduction, with a target of net leverage below 2x by year-end 2024.

Financial highlights

• Q4 GAAP operating profit was $607M, up 40%; net income was $420M and adjusted net income was $452M.

• Q4 adjusted operating margin was 10.9%, up 80 bps; adjusted EPS was $0.53 versus $0.40 a year earlier.

• FY adjusted operating profit rose 11% to $3.2B; GAAP operating profit was $2.3B, down 49% due to prior-year Chubb and Toshiba Carrier-related gains.

• FY operating cash flow was $2.6B and free cash flow was $2.138B, up 49% and 53%; Q4 free cash flow was $829M.

• FY GAAP net income was $1.3B and adjusted net income was $2.3B; GAAP EPS was $1.58 and adjusted EPS was $2.73.

Outlook and guidance

• FY 2024 sales guidance is $26.5B, with mid-single-digit organic growth, flat FX, a 20% acquisition contribution and a 5% divestiture reduction.

• Guidance calls for adjusted operating margin of 15.0%–15.5%, adjusted EPS of $2.80–$2.90 and free cash flow of ~$0.7B.

• Free cash flow guidance includes $1.7B in taxes on announced exit gains plus restructuring and transaction costs; excluding these items, FCF growth is expected at ~10%.

• Assumptions include a full year of Viessmann Climate Solutions, six months of Global Access Solutions and Commercial Refrigeration, double-digit aftermarket growth and 2–3% gross productivity.

• Other assumptions include adjusted interest expense of $525–$550M, a 23% adjusted tax rate, $550M of capital expenditures and $850M of depreciation and amortization; ~$4.5B of exit proceeds are expected to reduce debt.