Carrier (US:CARR)2023-04-27 14:08Financial Data and Key Metrics Changes - The company achieved 4% organic growth in Q1 2023, with adjusted EPS of $0.52 exceeding projections and significant year-over-year free cash flow growth [36][38] - Since 2020, the company has grown sales at an 8% CAGR and expanded margins by 150 basis points since 2021, with an adjusted EPS CAGR of 19% [37][38] - The stock price has appreciated 229% since the spin date, compared to a 66% appreciation for the S&P 500 [38] Business Line Data and Key Metrics Changes - Double-digit growth was reported in aftermarket controls, commercial and light commercial HVAC, and global truck trailer segments [36] - The company has introduced over 400 new products over the past three years, contributing to significant productivity growth [37] Market Data and Key Metrics Changes - The EU residential heat pump market is expected to grow revenues by 25% annually, driven by a shift from fossil fuel boilers to heat pumps [43] - Viessmann Climate Solutions is positioned as the number one premium brand in the European heat pump market, with strong market shares in Germany and across Europe [32][44] Company Strategy and Development Direction - The company aims to become a global leader in intelligent climate and energy solutions, focusing on the fastest-growing geographies and sustainable technology [11][12] - The acquisition of Viessmann Climate Solutions is seen as a transformative move to capitalize on the energy transition in Europe, expanding into integrated renewable offerings [42][59] Management's Comments on Operating Environment and Future Outlook - Management highlighted the urgency of transitioning from fossil fuel heating to heat pumps due to regulatory pressures in Europe, creating a unique growth opportunity [150][151] - The company expects to achieve a high single-digit free cash flow yield starting in year five post-acquisition, with adjusted EPS accretive starting in 2025 [56][57] Other Important Information - The enterprise value of the Viessmann acquisition is €12 billion, expected to add over 100 basis points to Carrier's overall revenue and EBITDA growth profile [55][56] - The company plans to quickly deleverage following the transaction, targeting a net leverage of about 2x by 2025 [27][57] Q&A Session All Questions and Answers Question: Can you help us understand Viessmann's market shares in heat pumps? - Viessmann is the number one premium brand in Europe for heat pumps and ranks in the top five for air-to-water heat pumps across Europe [32] Question: How do you view the exit strategy for Fire & Security and Commercial Refrigeration? - The company is evaluating the best exit strategy, whether through sale or spin, and expects to achieve higher multiples than previous divestitures [64] Question: What is the free cash flow profile for Viessmann? - Viessmann has maintained a free cash flow conversion rate of 90% to 95% of net income, with expectations to continue this trend post-acquisition [82] Question: How does the company plan to integrate Viessmann's offerings into North America? - The company is studying how to connect offerings in North America and has been in discussions with solar providers to create a holistic offering [128] Question: What are the unique aspects of Viessmann's direct-to-installer model? - Viessmann's direct-to-installer model allows for customer intimacy and rapid response to demand, which is crucial in the heat pump market [121][126]