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Why Is Carrier Global (CARR) Down 7.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Carrier Global (CARR - Free Report) . Shares have lost about 7.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Carrier Global due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Carrier Q4 Earnings Beat Estimates, Revenues Up Y/Y

Carrier Global has reported fourth-quarter 2021 adjusted earnings of 44 cents per share, which beat the Zacks Consensus Estimate by 15.8%. Further, the figure increased 41.9% year over year.

Net sales of $5.13 billion improved 12% year over year, owing to the strong performance of the HVAC, transport refrigeration, and Fire and Security segments. Further, the top line surpassed the Zacks Consensus Estimate of $4.78 billion.

Product sales (82.9% of net sales) increased 14% year over year to $4.3 billion. Service sales (17.1% of net sales) grew 1.7% year over year to $877 million.

Quarterly Details

HVAC revenues (53.2% of net sales) increased 16.9% year over year to $2.7 billion.

Refrigeration revenues (21.2% of net sales) rose 14.9% from the year-ago quarter to $1.1 billion.

Fire & Safety revenues (27.9% of net sales) grew 2.4% from the year-ago quarter to $1.4 billion.

Selling, general & administrative (SG&A), and research & development (R&D) expenses grew 0.7% and 5.5% year over year to $816 million and $134 million, respectively.

As a percentage of revenues, SG&A and R&D expenses contracted 170 basis points (bps) and 20 bps year over year, respectively.

The adjusted operating margin increased 14.1% year over year to $517 million. The operating margin expanded 20 basis points on a year-over-year basis to 10.1%.

Balance Sheet

As of Dec 31, 2021, Carrier had cash and cash equivalents of $2.9 billion compared with $2.7 billion as of Sep 30, 2021.

Total debt (including current portion), as of Dec 31, 2021, was $9.69 billion compared with $9.68 billion as of Sep 30, 2021.

The company generated $913 million in cash from operations compared with $579 million recorded in the previous quarter.

Capital expenditure stood at $138 million and free cash flow was $775 million for the fourth quarter.

Guidance

For 2022, Carrier projects sales growth of $20 billion.

The company expects adjusted earnings of $2.20-$2.30 per share.

Carrier also expects a free cash flow of $1.65 billion for 2022.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, Carrier Global has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Carrier Global has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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