Carrier (US:CARR)2023-05-23 19:18Carrier Global Corporation Conference Call Summary Company Overview - Company: Carrier Global Corporation (NYSE:CARR) - Event: Wolfe Research 16th Annual Global Transportation & Industrials Conference - Date: May 23, 2023 Key Points Industry and Market Context - The macro trading environment is being closely monitored, particularly in relation to the acquisition of Wiesmann, which is seen as a strategic move to enhance Carrier's portfolio in the residential heating and cooling market in Europe [1][2] - The company is experiencing mixed performance across its portfolio, with commercial HVAC and North American truck and trailer segments performing well, while the container and commercial refrigeration businesses are facing challenges [39][40] Acquisition of Wiesmann - The acquisition of Wiesmann is expected to provide immediate access to a faster-growing residential heating and cooling market in Europe, where Carrier has had limited exposure [2] - Regulatory hurdles for the acquisition are standard and manageable, with a timeline for closure by the end of the year [3][5] - Wiesmann's management team will continue to lead the business post-acquisition, leveraging their expertise and existing channels to enhance Carrier's product offerings [6] Investment and Capacity Expansion - Wiesmann has made significant investments to transition from boilers to heat pumps, with this year being a peak for capital expenditures [8] - The company does not anticipate a significant impact on free cash flow conversion due to these investments, as Wiesmann has historically maintained a high free cash flow conversion rate of 90% to 95% [9] Product Transition and Market Dynamics - The boiler business is expected to decline in Europe, while heat pumps are projected to grow at strong double-digit rates, with heat pumps priced significantly higher than boilers [11][12] - The transition to heat pumps is seen as an opportunity for revenue growth, with the potential for significant margin retention [12] Portfolio Optimization and Divestitures - Carrier is actively working on divesting non-core assets, including foreign security and commercial refrigeration segments, with a focus on achieving a clean exit and maximizing proceeds [16][22] - The company is optimistic about the interest in its fire and security businesses, which are considered high-margin and low-capital requirements [23] Aftermarket and Service Revenue Growth - Carrier is focusing on expanding its aftermarket services, which currently represent about 20% to 25% of the total available market for its installed base [49] - The company has implemented strategies to enhance service revenues, which have been growing at strong double-digit rates [49] Market Performance and Outlook - The residential segment is expected to see a decline in volume but offset by pricing and mix improvements, with revenues projected to remain flat year-over-year [55] - The company anticipates a recovery in the container business in the second half of the year, following a downturn that began in Q3 of the previous year [52] Pricing Strategy - Carrier expects to achieve approximately $500 million in pricing actions for the year, which equates to a 2% to 3% increase overall [57] - Pricing for new units is holding steady, with a 10% to 15% increase in SEER units [56] Additional Insights - The installer network for Wiesmann is considered critical for maintaining competitive advantage, as there is a shortage of trained installers in the market [35][36] - The company is well-positioned to leverage its existing facilities and synergies from previous acquisitions to support growth in the heat pump market [9][12] This summary encapsulates the key discussions and insights from the conference call, highlighting Carrier's strategic initiatives, market dynamics, and financial outlook.