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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 2020 adjusted earnings of 33 cents per share, which beat the Zacks Consensus Estimate by 22.2%. However, the figure decreased 54.8% year over year.

Net sales of $3.97 billion beat the consensus mark by 9.5%. However, the top line declined 20% year over year primarily due to the negative impact of the coronavirus outbreak.

Product sales (82.5% of net sales) decreased 20.9% year over year to $3.28 billion. Service sales (17.5% of net sales) dropped 15.3% year over year to $697 million.

Quarterly Details

HVAC revenues (57.7% of net sales) decreased 16.2% year over year to $2.29 billion. Operating profit declined 33.8% from the year-ago quarter to $359 million.

Carrier Global Corporation Price, Consensus and EPS Surprise

 

Carrier Global Corporation Price, Consensus and EPS Surprise

Carrier Global Corporation price-consensus-eps-surprise-chart | Carrier Global Corporation Quote

Refrigeration revenues (17.6% of net sales) fell 26.7% from the year-ago quarter to $700 million. Operating profit plunged 48.8% to $64 million.

Fire & Safety revenues (26.6% of net sales) slid 23.7% from the year-ago quarter to $1.06 billion. Operating profit was $112 million, down 41.7% year over year.

Cost of products sold was $2.34 billion, down 19.4% year over year. Moreover, cost of services sold slipped 16.2% to $488 million.

The downside can be attributed to Carrier’s aggressive cost-containment strategy and the acceleration of Carrier 600, a program expected to remove $600 million in costs in three years.

Both selling, general & administrative (SG&A) and research & development (R&D) expenses, as a percentage of revenues, increased 230 basis points (bps) and 30 bps each on a year-over-year basis.

Segmental operating profit in the second quarter declined 37.7% year over year to $535 million.

Adjusted operating profit fell 41.5% year over year to $476 million. Operating margin contracted 440 bps on a year-over-year basis to 12%.

Balance Sheet & Other Details

As of Jun 30, 2020, Carrier had cash and cash equivalents worth $2.70 billion compared with $768 million as of Mar 31, 2020.

Total debt (including current portion) as of Jun 30, 2020 was $11.73 billion with no debt maturities until 2023.

In the second quarter, Carrier generated $509 million of cash from operating activities, down 8.1% year over year. The company’s quarterly free cash flow came in at $463 million, down 8.5% year over year.

Guidance

For 2020, Carrier now expects sales between $15.5 billion and $17 billion, up from the previous guidance of $15-$17 billion. Adjusted operating profit is expected in the $1.8-$2 billion range, up from the previous range of $1.7-$2 billion.

Moreover, free cash flow is expected to be at least $1.1 billion, up from the previous guidance of at least $1.0 billion.

Zacks Rank & Stocks to Consider

Carrier currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector are Dropbox (DBX - Free Report) , Everbridge (EVBG - Free Report) and Asure Software (ASUR - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Both Dropbox and Everbridge are scheduled to report earnings on Aug 6. Asure Software is set to release quarterly results on Aug 10.

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