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Carrier (CARR) - 2024 Q3 - Earnings Call Transcript
CARRCarrier (CARR)2024-10-24 15:54
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Financial Data and Key Metrics Changes - Reported sales of 6billionwereup216 billion were up 21% year-over-year, with organic sales growth of 4% [18] - Adjusted operating profit increased by 19% to over 1 billion, driven by organic growth and productivity [18] - Adjusted EPS from continuing operations was 0.77,up30.77, up 3% year-over-year [19] - Preliminary free cash flow was an outflow of about 370 million, with underlying performance of approximately 700million[20]BusinessLineDataandKeyMetricsChanges−HVACreportedsalesgrowthof26700 million [20] Business Line Data and Key Metrics Changes - HVAC reported sales growth of 26%, reflecting organic sales growth of 6% and contributions from Viessmann Climate Solutions [21] - Refrigeration segment saw reported and organic sales up 1%, with transport refrigeration up 3% [22] - Commercial refrigeration sales were about 750 million for the year-to-date, with immaterial adjusted operating profit contribution [23] Market Data and Key Metrics Changes - Organic orders were up close to 20%, with North America residential HVAC orders up 30% year-over-year [22] - Orders for data centers increased more than 3x year-to-date, indicating strong demand in that vertical [8] - In Europe, heat pump subsidy applications were up about 50% sequentially and doubled compared to last year [15] Company Strategy and Development Direction - The company aims to be the global leader in intelligent climate and energy solutions, focusing on differentiation and customer solutions [7] - Continued emphasis on aftermarket growth, with expectations for double-digit growth for the fourth consecutive year [6] - The company is on track to eliminate 200millionofrun−ratecoststhroughout2024,contributingtoimprovedprofitability[27]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismabout2025,highlightingstrongbacklogandexpecteddouble−digitadjustedEPSgrowthfromorganicrevenuegrowth[42]−Thecompanyisconfidentinitsabilitytomanagepeakhourdemandandintroducenewenergymanagementsolutions[10]−Managementnotedthatthetransformationprocessislargelybehindthem,allowingafocusoncustomergrowthandinnovation[30]OtherImportantInformation−ThecompanyclosedthesaleofitscommercialrefrigerationbusinessonOctober1andisontracktofinalizethedivestitureofthefireandsecuritysegmentbyyear−end[7]−SettlementsrelatedtoAFFFliabilitiesareexpectedtoresolvemostcurrentandfutureclaims,withcashsettlementpaymentsamountingto200 million of run-rate costs throughout 2024, contributing to improved profitability [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about 2025, highlighting strong backlog and expected double-digit adjusted EPS growth from organic revenue growth [42] - The company is confident in its ability to manage peak hour demand and introduce new energy management solutions [10] - Management noted that the transformation process is largely behind them, allowing a focus on customer growth and innovation [30] Other Important Information - The company closed the sale of its commercial refrigeration business on October 1 and is on track to finalize the divestiture of the fire and security segment by year-end [7] - Settlements related to AFFF liabilities are expected to resolve most current and future claims, with cash settlement payments amounting to 615 million [29][30] Q&A Session Summary Question: Can you share your view on the bottoming process for Viessmann and revenue expectations into 2025? - Management indicated that recent order trends have shown improvement, suggesting a potential turning point, especially with subsidies starting to be paid [33] Question: What are the expectations regarding the pre-buy of 410A? - Management confirmed they have the capacity to meet demand and are building inventory to support underlying demand for the first quarter of next year [34] Question: Can you clarify the differences in adjusted EPS guidance? - Management explained the $0.10 delta between the core and continuing operations guidance is due to the allocation of headquarter charges and interest expense treatment [38] Question: What are the expectations for the light commercial business next year? - Management noted that while it is early to predict, they aim to end the year with balanced inventory and expect continued strength from ESSER funding [62] Question: How do you view the aftermarket strategy moving forward? - Management described the new aftermarket strategy as more sophisticated, focusing on inventory management and value-added services, with expectations for higher margins [78]