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Carrier (CARR) Q2 Earnings Beat Estimates, Revenues Fall Y/Y
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Carrier Global (CARR - Free Report) reported second-quarter 2022 adjusted earnings of 69 cents per share, which beat the Zacks Consensus Estimate by 11.3%. The figure increased 8% year over year and 28%, sequentially.
Net sales of $5.21 billion declined 4% year over year but rose 12%, sequentially. The top line surpassed the Zacks Consensus Estimate of $5.16 billion.
The top-line decline was a result of the weak performance of the Fire & Security segment. However, strength in the HVAC and Refrigeration segments aided the quarterly performance.
Product sales (89% of net sales) of $4.7 billion increased 2% year over year and 12%, sequentially. Service sales (11% of net sales) of $549 million were down 36% year over year but up 13% from the previous quarter’s level.
Carrier Global Corporation Price, Consensus and EPS Surprise
HVAC revenues (65% of net sales) increased 9% year over year to $3.39 billion. Growth was driven by strength in North America residential and light commercial businesses.
Refrigeration revenues (20% of net sales) rose 2% from the year-ago quarter’s level to $1.04 billion on the increased sales of transport and commercial refrigeration.
Fire & Security revenues (17% of net sales) of $887 million were down 37% year over year due to the Chubb divestiture.
Operating Results
Research & development (R&D) expenses dipped 2% year over year to $122 million. Selling, general & administrative (SG&A) expenses fell 24% from the year-ago quarter’s level to $614 million.
As a percentage of revenues, R&D expenses were in line with the prior-year figure but SG&A expenses contracted 320 basis points (bps) year over year.
Adjusted operating margin expanded 130 bps on a year-over-year basis to 16.4%.
Adjusted operating margin of the HVAC segment contracted 70 bps year over year to 18%. The Refrigeration segment reported an adjusted operating margin of 14.6%, expanding 230 bps. Adjusted operating margin of Fire & Security was 15.1%, expanding 310 bps year over year.
Balance Sheet
As of Jun 30, 2022, Carrier had cash and cash equivalents of $3.02 billion compared with $3.60 billion on Mar 31, 2022.
Total debt (including current portion) as of Jun 30, 2022 was $8.57 billion compared with $8.56 billion on Mar 31, 2022.
In the reported quarter, Carrier generated $32 million cash from operations. CARR used $202 million cash in operations in the previous quarter.
Capital expenditure was $66 million compared with $56 million in the first quarter of 2022. Free cash flow was a negative $34 million for the reported quarter.
Guidance
For 2022, Carrier raised its expected sales from $20 billion to $20.8 bilion. The revised guidance includes $800 million sales of Toshiba Carrier Corporation. Management expects to complete the acquisition of Toshiba Carrier Corporation in early August 2022. The Zacks Consensus Estimate for sales is pegged at $19.83 billion.
Carrier also lifted adjusted earnings per share guidance from $2.20-$2.30 to $2.25-$2.35. The Zacks Consensus Estimate for the same is pegged at $2.28 per share.
Carrier expects adjusted operating margin to expand 40 bps from the year-ago reported number. Its free cash flow is projected to be $1.65 billion for 2022.
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Carrier (CARR) Q2 Earnings Beat Estimates, Revenues Fall Y/Y
Carrier Global (CARR - Free Report) reported second-quarter 2022 adjusted earnings of 69 cents per share, which beat the Zacks Consensus Estimate by 11.3%. The figure increased 8% year over year and 28%, sequentially.
Net sales of $5.21 billion declined 4% year over year but rose 12%, sequentially. The top line surpassed the Zacks Consensus Estimate of $5.16 billion.
The top-line decline was a result of the weak performance of the Fire & Security segment. However, strength in the HVAC and Refrigeration segments aided the quarterly performance.
Product sales (89% of net sales) of $4.7 billion increased 2% year over year and 12%, sequentially. Service sales (11% of net sales) of $549 million were down 36% year over year but up 13% from the previous quarter’s level.
Carrier Global Corporation Price, Consensus and EPS Surprise
Carrier Global Corporation price-consensus-eps-surprise-chart | Carrier Global Corporation Quote
Segment Details
HVAC revenues (65% of net sales) increased 9% year over year to $3.39 billion. Growth was driven by strength in North America residential and light commercial businesses.
Refrigeration revenues (20% of net sales) rose 2% from the year-ago quarter’s level to $1.04 billion on the increased sales of transport and commercial refrigeration.
Fire & Security revenues (17% of net sales) of $887 million were down 37% year over year due to the Chubb divestiture.
Operating Results
Research & development (R&D) expenses dipped 2% year over year to $122 million. Selling, general & administrative (SG&A) expenses fell 24% from the year-ago quarter’s level to $614 million.
As a percentage of revenues, R&D expenses were in line with the prior-year figure but SG&A expenses contracted 320 basis points (bps) year over year.
Adjusted operating margin expanded 130 bps on a year-over-year basis to 16.4%.
Adjusted operating margin of the HVAC segment contracted 70 bps year over year to 18%. The Refrigeration segment reported an adjusted operating margin of 14.6%, expanding 230 bps. Adjusted operating margin of Fire & Security was 15.1%, expanding 310 bps year over year.
Balance Sheet
As of Jun 30, 2022, Carrier had cash and cash equivalents of $3.02 billion compared with $3.60 billion on Mar 31, 2022.
Total debt (including current portion) as of Jun 30, 2022 was $8.57 billion compared with $8.56 billion on Mar 31, 2022.
In the reported quarter, Carrier generated $32 million cash from operations. CARR used $202 million cash in operations in the previous quarter.
Capital expenditure was $66 million compared with $56 million in the first quarter of 2022. Free cash flow was a negative $34 million for the reported quarter.
Guidance
For 2022, Carrier raised its expected sales from $20 billion to $20.8 bilion. The revised guidance includes $800 million sales of Toshiba Carrier Corporation. Management expects to complete the acquisition of Toshiba Carrier Corporation in early August 2022. The Zacks Consensus Estimate for sales is pegged at $19.83 billion.
Carrier also lifted adjusted earnings per share guidance from $2.20-$2.30 to $2.25-$2.35. The Zacks Consensus Estimate for the same is pegged at $2.28 per share.
Carrier expects adjusted operating margin to expand 40 bps from the year-ago reported number. Its free cash flow is projected to be $1.65 billion for 2022.
Zacks Rank & Stocks to Consider
Currently, Carrier has a Zacks Rank #3 (Hold). Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Aspen Technology (AZPN - Free Report) , Keysight Technologies (KEYS - Free Report) and Asure Software (ASUR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Aspen technology has returned 18.9% in the year-to-date period. The long-term earnings growth rate for AZPN is currently projected at 16.3%.
Keysight Technologies has lost 26.8% in the year-to-date period. KEYS’ long-term earnings growth rate is currently projected at 9.1%.
Asure Software has lost 27.2% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.