Carrier Global (CARR Quick QuoteCARR - Free Report) reported first-quarter 2023 adjusted earnings of 52 cents per share, which surpassed the Zacks Consensus Estimate by 6.1%. The figure decreased by 3.7% year over year.

Net sales of $5.3 billion came ahead of the Zacks Consensus Estimate of $5 billion. Further, the figure increased by 13% year over year.

Strong momentum across HVAC and Fire & Security segments drove top-line growth.

However, softness in the Refrigeration segment was a concern.

Product sales (88.9% of net sales) of $4.7 billion increased 12.4% year over year. Service sales (11.1% of net sales) of $587 million were up 21.3% year over year.

Segment Details

HVAC revenues (68.7% of net sales) increased 22% year-over-year to $3.6 billion. Well-performing light commercial and commercial HVAC businesses contributed well.

Refrigeration revenues of $898 million (17% of net sales) were down 8% from the year-ago quarter’s level. The slowdown in container sales and orders was a major concern. Softness in commercial refrigeration was a concern.

Fire & Security revenues (16.5% of net sales) of $869 million were up 6% year over year. Nevertheless, solid momentum among access solutions, strength in the commercial fire business and growing momentum in the Americas and Asia remained positives.

Operating Results

Research & development (R&D) expenses increased 11.2% year over year to $139 million. Selling, general & administrative (SG&A) expenses grew 20% from the year-ago quarter’s level to $721 million.

As a percentage of revenues, R&D expenses contracted 10 basis points (bps) from the prior-year quarter’s level, but SG&A expenses expanded 80 bps year over year.

Adjusted operating margin contracted 190 bps on a year-over-year basis to 12.2%.

Adjusted operating margin of the HVAC segment contracted 260 bps year over year to 13.5%. The

The Refrigeration segment reported an adjusted operating margin of 12.4%, expanding 90 bps.

Adjusted operating margin of Fire & Security was 12.4%, contracting by 190 bps year over year.

Balance Sheet

As of Mar 31, 2023, Carrier had cash and cash equivalents of $3.35 billion compared with $3.52 billion on Dec 31, 2022.

Total debt (including the current portion) at the end of the reported quarter was $8.9 billion compared with $8.8 billion at the end of the previous quarter.

In the reported quarter, Carrier generated $120 million in cash from operations, down from $1.1 billion in the prior quarter.

Capital expenditure was $70 million in the first quarter of 2023. Free cash flow was $50 million for the reported quarter.

2023 Guidance

For 2023, Carrier reaffirmed its guidance. It expects sales of $22 billion. The Zacks Consensus Estimate for sales is pegged at $22.04 billion.

Carrier anticipates adjusted earnings per share within $2.50-$2.60. The Zacks Consensus Estimate for the same is pegged at $2.55 per share.

Carrier expects an adjusted operating margin of 14% and free cash flow of $1.9 billion.

Zacks Rank & Stocks to Consider

Currently, Carrier has a Zacks Rank #3 (Hold).

Investors interested in the broader Zacks Computer & Technology sector may consider some better-ranked stocks like Salesforce (CRM Quick QuoteCRM - Free Report) , Arista Networks (ANET Quick QuoteANET - Free Report) and Analog Devices (ADI Quick QuoteADI - Free Report) . While Salesforce sports a Zacks Rank #1 (Strong Buy), Arista Networks and Analog Devices carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Salesforce’s shares have risen 43.8% in the year-to-date period. CRM’s long-term earnings growth rate is currently anticipated to be 16.75%.

Arista Networks’ shares have risen 26.5% in the year-to-date period. ANET’s long-term earnings growth rate is currently projected to be 14.17%.

Analog Devices’ shares have gained 10.5% in the year-to-date period. ADI’s long-term earnings growth rate is currently expected to be 12.25%.