Carrier Global Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Nigel Coe - Wolfe Research - Analyst : So guidance for the press, just want to confirm, Patrick, you're sort of pointing towards $0.87 or so of EPS base case and about 5% core growth.

Question: Nigel Coe - Wolfe Research - Analyst : For Q2, yes, Q2 '25, yes.

Question: Nigel Coe - Wolfe Research - Analyst : That's great. And then just given all the moving pieces across the portfolio, how does that mid-single-digit look across the new segments?

Question: Nigel Coe - Wolfe Research - Analyst : Let's say both, Q2 and full year.

Question: Nigel Coe - Wolfe Research - Analyst : That's great. And then just a quick follow-on the tariff. I think $300 million is the number that will be offset by price. Any more color in terms of what the gross impact is and how much has been offset by productivity and other actions?

Question: Nigel Coe - Wolfe Research - Analyst : Okay, thanks guys thank you.

Question: Julian Mitchell - Barclays - Analyst : Hi, good morning, maybe I just wondered if you could drill a little bit more into the Americas segment and sort of flesh out perhaps kind of what you're seeing in the resi piece there and like commercial and that's the 2 places where I suppose the full year guidance has changed in May versus February. So help us understand the drivers there and how you think about those 2 pieces playing out over the balance of this year?

Question: Julian Mitchell - Barclays - Analyst : That's very helpful. And then just maybe secondly, I wanted to understand on the CS Americas business, looking more at the margin front. So very strong margins up year-on-year in Q1 of over 400 points. The full year is guided up about 50 bps. And if we just look at absolute margin, there isn't much difference between what you saw in Q1 and what's guided for the full year, even though perhaps 1 might think with the seasonality, it should be moving higher particularly second and third quarter versus first. So maybe sort of flesh out a bit how you see those margins developing over the balance of the year, please, in Americas?

Question: Julian Mitchell - Barclays - Analyst : That's great, Patrick. Thank you.

Question: Andy Kaplowitz - Citigroup - Analyst : Dave, can you update us on your outlook for Viessmann at this point? Obviously, orders in backlog are up and you said RLC Europe will return to organic growth in Q2. So do you still see flat for Viessmann for the year? I think you talked about 150 basis margin improvement and then stepping REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 11:30AM, CARR.N - Q1 2025 Carrier Global Corp Earnings Call back on overall CSC, you talked about your work to get that margin up, but maybe you could elaborate on the issues in the segment and what you're doing to address them?

Question: Andy Kaplowitz - Citigroup - Analyst : And then the margin on the segment, Dave?

Question: Andy Kaplowitz - Citigroup - Analyst : Correct.

Question: Andy Kaplowitz - Citigroup - Analyst : Yes, the margin improvement in that segment, Patrick.

Question: Andy Kaplowitz - Citigroup - Analyst : Got it. And then Dave, can you give more color on to what's going on with your commercial HVAC business Americas, given the capacity increase that you have this year? I know you said you get data center to double that -- I assume that's still on track. And then 20% growth in commercial HVAC is good. I assume that's pretty sustainable moving forward given the capacity you've added?

Question: Andy Kaplowitz - Citigroup - Analyst : Appreciate all the color.

Question: Steph Tusa - JPMorgan - Analyst : Yes, yes, a little euro in there. Just wanted to make sure that we're clear on the base of -- there's been a lot of restatements here, but like what is the actual base for earnings for 2Q of '24 again? Can you just remind us what that is, EPS? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 11:30AM, CARR.N - Q1 2025 Carrier Global Corp Earnings Call

Question: Steph Tusa - JPMorgan - Analyst : Yes, $0.73, okay. Just wanted to make sure because like Bloomberg still shows 75 and you guys have restated a bit. So I just want to make sure we have the base okay on that.

Question: Steph Tusa - JPMorgan - Analyst : Yes. Okay. Got it. Sorry for wasting time on the call here. Just on the resi front. And any real hiccups on the 454 actual channel like the installation because of the kind of dramatic price increases that we're seeing from the suppliers. And I don't know there's limited supply of containers and things like that going on. Any issues there?

Question: Steph Tusa - JPMorgan - Analyst : Okay. And then just 1 follow-up on Europe. That margin was a little bit lower than I was expecting. What do you think is a good kind of normalized rate, assuming Viessmann grows in line with your expectations? I mean that seems to be pretty depressed at a low double-digit rate, maybe what would be kind of a longer-term thought around that margin potential?

Question: Jeffrey Sprague - Vertical Research - Analyst : Hey, thank you. Good morning, everyone. Hey Dave, just back to kind of order and subsidy action in Viessmann in Germany, what do you attribute the rush for subsidy applications? Was there sort of a view that maybe the new government wouldn't be supportive and there was a rush to get subsidies in. Just kind of wondering what the real signal from the market is and that stat you shared with us today.

Question: Jeffrey Sprague - Vertical Research - Analyst : And then just back to kind of the idea of gross tariffs, right? You kind of told us what's left on the $300 million. Obviously, you've been very, very cost focused from day 1 since spin. I just wonder if you could give us some examples of maybe the incremental things you did to offset whatever that residual was, how much of it was inside your 4 walls versus sourcing and other changes you might have made.

Question: Jeffrey Sprague - Vertical Research - Analyst : Got it, thank you.

Question: Joseph Ritchie - Goldman Sachs Group, Inc. - Analyst : Thank you, good morning guys. Hey Joe. So, can.

Question: Deane Dray - RBC - Analyst : Thank you. Good morning, everyone. I was hoping Patrick can take us through the free cash flow dynamics in the quarter. It was a bit light versus seasonal. You just mentioned a bit higher inventory and you reaffirmed free cash flow for the year, but what was unique about this quarter?

Question: Deane Dray - RBC - Analyst : Great thanks for that. And then can you just expand on services. They did well this quarter, just the plan for the year? Any new initiatives there?

Question: Joseph O'Dea - Wells Fargo - Analyst : Hi, good morning. Thanks for taking my questions. Can you unpack the tariffs a little bit just in terms of sizing the cost headwind this year and then the breakdown of what you're doing on the cost and price side. And then any specifics on the China component of that cost headwind as well as any other core you can give? The last part of it is what does this mean for resi pricing if we think about back half of the year, 454 normal pricing and then now the addition, what kind of price mix you're looking at on resi in the back half?

Question: Joseph O'Dea - Wells Fargo - Analyst : Got it. That's helpful. And then on the commercial HVAC Americas, the nondata center business up high single digit is actually a little bit more surprising, I'd say, than the data center growth. Can you unpack that a little bit from renovation, new construction price I'd say some of the nonoriented to indicators aren't exactly encouraging, but that growth rate is pretty good. And so what you're doing versus what you see in the market?

Question: Joseph O'Dea - Wells Fargo - Analyst : Thank you.

Question: Chris Snyder - Morgan Stanley - Analyst : I wanted to ask on America's resi. The $75 million or so that you guys kind of called out in Q4 as pre-buy. Did that come out in Q1 and was just overwhelmed by strength in mixed tail and elsewhere? Or is that expected to come out in Q2, even with this 15%, 20% Americas guide? Or do you just -- maybe I don't even think it comes out anymore? Thank you.

Question: Chris Snyder - Morgan Stanley - Analyst : Alright thank you I appreciate that. I wanted to follow up on service. And clearly, the focus there has driven great growth for the service business with a double-digit forever mantra holding strong. But I guess my question is, is it also helping you win on the equipment side for some of the bigger applied projects, the stronger service offering. Just anything you could talk about that flywheel of actually driving equipment on the back of service? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 11:30AM, CARR.N - Q1 2025 Carrier Global Corp Earnings Call

Question: Chris Snyder - Morgan Stanley - Analyst : Thank you Dave. I appreciate that. Yeah thank you.

Question: Amit Mehrotra - UBS - Analyst : Patrick, I just want to come back to the new resi Americas guide, high single, low double. I think in your previous guidance of high single, it was all kind of price mix and then volume or units were flat to down. Can you just update that in terms of what you're assuming? And then obviously, Europe resi and like commercial orders were just a lot stronger than the organic growth right now. And I don't know if that's a comp issue or maybe if that's a fair assumption that we should expect a decent sequential uptick in revenue as we progress through the year.

Question: Amit Mehrotra - UBS - Analyst : Got it. So just, Dave, just circling back on what you said, it looks like both volume and mix is an attribution to the revision of resi HVAC, which is top line, which is great. One final question, if I could, just maybe high level. And listen, you don't have to comment on it if you don't want to, but you had a proxy target out there of $3.60 of earnings. It's really hard to forecast that far out. Maybe just give us some puts and takes on your confidence around that number in terms of above the line versus below the line items? I know you got some tax dynamics, too, with Viessmann tax losses, things like that. But just talk about why you put that out there? Why was that the right number and maybe the confidence around below or above the line items on that?

Question: Deane Dray - RBC - Analyst : Very clear, thank you very much appreciate it.

Question: Stephen Volkmann - Jefferies - Analyst : I'm wondering if we can just look at CST a little bit, the mid-single-digit growth forecast kind of unchanged, but it feels like some of the industry forecasts around things like truck have deteriorated. So I know your mix is a little different than some others, but maybe just call out a little bit

Question: Stephen Volkmann - Jefferies - Analyst : Great. Helpful. And then it looks like margin is also going to be sort of on the upswing here as the year progresses. Any sense of how we should kind of model that cadence.

Question: Stephen Volkmann - Jefferies - Analyst : Perfect thank you guys.

Question: Tommy Moll - Stephens - Analyst : Morning and thank you for taking my questions.

Question: Tommy Moll - Stephens - Analyst : David, I wanted to start on your Americas light commercial business, noting the comps there can be tricky. But I'm just observing that the outlook was reduced pretty significantly from up low to mid-singles last time we spoke, and now we're looking at down doubles. What were some of the factors that changed there in your outlook?

Question: Tommy Moll - Stephens - Analyst : Thanks for the detail, Dave. I wanted to pivot to a question on the Google partnership that you discussed earlier in the call. Is this participation in a demand response kind of program? Or what additional detail can you give particularly around the monetization opportunity there? Thank you.