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Carrier (CARR) Q1 Earnings Beat Estimates, Revenues Fall Y/Y

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Carrier Global (CARR - Free Report) reported first-quarter 2020 adjusted earnings of 35 cents per share, which beat the Zacks Consensus Estimate by 84.2%. However, the figure decreased 27.1% year over year.

Net sales of $3.88 billion beat the consensus mark by 24.1%. However, the top line declined 10.1% year over year due to lower gas furnace sales and North America truck trailer sales as well as the wind-down of a residential intrusion business. Coronavirus also adversely impacted sales.

Product sales (80.9% of net sales) decreased 11.7% year over year to $3.15 billion. Product sales (19.1% of net sales) dipped 2.1% year over year to $741 million.

Quarterly Details

HVAC revenues (50.4% of net sales) decreased 9.6% year over year to $1.96 billion. Operating profit declined 18.5% from the year-ago quarter to $242 million.

Refrigeration revenues (20.8% of net sales) fell 16% from the year-ago quarter to $808 million. Operating profit plunged 23.8% to $99 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

 

Fire & Safety revenues (31% of net sales) slid 6.5% from the year-ago quarter to $1.21 billion. Operating profit was $126 million, down 13.1% year over year.
 
Cost of goods sold was $2.24 billion, down 12.8% year over year. Moreover, cost of services sold slipped 0.6% to $529 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 60 basis points (bps) and 10 bps each on a year-over-year basis.

Segmental operating profit in the first quarter declined 18.4% year over year to $467 million.

Adjusted operating profit fell 16.2% year over year to $436 million. Operating margin contracted 80 bps on a year-over-year basis to 11.2%.

Balance Sheet & Other Details

As of Mar 31, 2020, Carrier had cash and cash equivalents worth $768 million compared with $952 million as of Dec 31, 2019.

Total debt (including current portion) as of Mar 31, 2020 was $11.25 billion with no debt maturities until 2023.

In the first quarter, Carrier generated $47 million of cash from operating activities against the year-ago quarter’s cash outflow of $183 million. The company’s quarterly free cash outflow came in at $1 million compared with free cash outflow of $224 million in the year-ago quarter.

Outlook

Carrier identified $425 million in savings and plans a 40-50% reduction in capital spending.

Although the company withdrew its 2020 guidance on Apr 3, per management’s “reasonable scenario” sales are expected between $15 billion and $17 billion while adjusted operating profit in the $1.7-$2 billion range.

Zacks Rank & Stocks to Consider

Carrier currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector are Logitech (LOGI - Free Report) , Grid Dynamics (GDYN - Free Report) and Plantronics (PLT - Free Report) . While Logitech sports a Zacks Rank #1 (Strong Buy), both Grid Dynamics and Plantronics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Both Logitech and Grid Dynamics are set to report quarterly results on May 11, while Plantronics will release earnings on May 21.


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