Carrier Global Corp Q4 2024 Earnings Call Transcript

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

Question: Jeffrey Sprague - Vertical Research - Analyst : Hey, thank you, good morning, everyone. Good morning, Dave, Patrick. Mike, good to hear you're there, too. Can we just drill a little bit more into resi and what you saw in the quarter. So you're characterizing it, I guess, as no pre-buy or no significant pre-buy. Maybe you can just kind of elaborate on that. Does that suggest your holding inventory that you sell into genral in Q1? Or any other kind of color on how the kind of pieces moving parts together?

Question: Jeffrey Sprague - Vertical Research - Analyst : Right. And then so getting to high single digit for the year, we got in 410A in Q1. And then we've sort of got price related mix effect for the balance of the year getting us to high single digit. What do you think the kind of realized prices on the 454B units on an all-in basis?

Question: Jeffrey Sprague - Vertical Research - Analyst : Thank you for that. Great color. And maybe just a quick one, and I'll pass it on. Just on the share repurchase, I think many of us thought you might do an ASR, it looks like you bought a lot the way in Q4. Is that the plan for the balance of 2025 also as the regular way our repo.

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

Question: Andrew Kaplowitz - Citigroup - Analyst : Good morning everyone.

Question: Andrew Kaplowitz - Citigroup - Analyst : Dave, so maybe just a little more color into your outlook for (inaudible)'25 . I know for a while, you were talking about a stronger potential revenue growth possible in '25 and now you're talking about this 24% backlog reduction headwind. Of course, German elections are coming up. So maybe just talk about the visibility to get to that flat growth. And is it derisked now in your opinion in the guidance when you look at the items that are in your control, aftermarket synergies, how much visibility do you have in getting those pieces of growth?

Question: Andrew Kaplowitz - Citigroup - Analyst : Very helpful, David. And then David, Patrick, it looks like you're forecasting something like low 30s incrementals for HVAC in '25 maybe puts and takes to get there, especially because it's topical around tariffs. How do you account in your bridge? Do you put the China in there? And then there's obviously steel and aluminum, I just got passed, can you remind us of the cost structure on that side of the business?

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

Question: Julian Mitchell - Barclays - Analyst : Hi, good morning. Maybe just first off on the organic sales guide for the year. So you're starting out with sort of flat to up slightly in the first quarter, total company, the year is up mid-single digits. So maybe walk us through kind of how we think about growth for the rest of the year after Q1 and maybe put a finer point on the cadence of a couple of the businesses most in focus, which are Viessmann and the Americas resi HVAC, please?

Question: Julian Mitchell - Barclays - Analyst : That's very helpful. Thank you. And then maybe if you could focus for a second just on the light commercial business in the Americas. There's often a lot of investor concerns around decline there. And obviously, the orders quarter-to-quarter are lumpy. You're guiding for revenue growth, I think low to mid-single digits for this year ahead in Americas like commercial. So maybe just help us understand kind of how you see the market dynamics there? Any concerns around the education vertical given ESRA funding moving lower, any color on that vertical would be great.

Question: Julian Mitchell - Barclays - Analyst : Great, 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. FEBRUARY 11, 2025 / 12:30PM, CARR.N - Q4 2024 Carrier Global Corp Earnings Call

Question: Stephen Tusa - JPMorgan - Analyst : Hi, good morning. Just on the resi side, the HRI data is obviously up, pretty substantially. You guys are talking like others about a more modest degree of pre-buy. Is there, do you think you're kind of in line with the industry? Is there somebody else that may be selling more? And maybe just talk about how you see the competitive environment playing out in the first half?

Question: Stephen Tusa - JPMorgan - Analyst : And as far as heading into this year, and pricing in the marketplace. Do you see anybody, obviously, there were some big share shifts last year with one of your major competitors. What are you seeing in the channel there? And are you concerned at all about any efforts there to regain that share?

Question: Stephen Tusa - JPMorgan - Analyst : Right, okay. Thanks.

Question: Joe Ritchie - Goldman Sachs - Analyst : Hey guys, good morning.

Question: Joe Ritchie - Goldman Sachs - Analyst : Hey. Can you guys give us just an update on your capacity additions on Americas Commercial. I think I recall you guys pretty significantly increasing your capacity and then ultimately, what does that ultimately mean for like being able to maybe convert your backlog faster in the next like 12 to 24 months?

Question: Joe Ritchie - Goldman Sachs - Analyst : Great to hear. And then just my quick follow-up on Viessmann. You guys gave a lot of color around your growth expectations for the year. Can you maybe give us a little bit more on just the margins and the work that you've done from a cost structure standpoint and how we should expect those margins to improve in 2025?

Question: Joe Ritchie - Goldman Sachs - Analyst : Okay, great. 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. FEBRUARY 11, 2025 / 12:30PM, CARR.N - Q4 2024 Carrier Global Corp Earnings Call

Question: Nigel Coe - Wolfe Research - Analyst : Thanks. Good morning, everyone. Got a lot of ground here. So just a couple of quick cleanups. I think, Patrick, you said 10% of the units this year will be 410A versus 454B. So I'm guessing that the cluster of 410A units held inventory, that's the 10% that happens in 1Q. Just wanted to confirm that. And then the mid-teens movement is something that's getting a lot of attention out there in the market. So just maybe just, why do you think that's so strong? Maybe just talk about some market share gains, perhaps. So, maybe do you think that there's contractors of pre-bought units and holding them in the inventory or install them? Just wonder if there's any intel on what's happened at the contract level.

Question: Nigel Coe - Wolfe Research - Analyst : Okay. Thanks a lot. That's two questions, I'll leave it there. Thanks.

Question: Deane Dray - RBC - Analyst : Thank you. Good morning.

Question: Deane Dray - RBC - Analyst : Hey, I would like to drill down a bit on Quantum LEAP initiative, if we could. Just give us a sense of the contribution from data center for '24. How much did it grow with expectations for '25? And anything you can give us an update on the SLA partnership, how that's going? And it looks like you've broadened some of the product lines within that business as well.

Question: Deane Dray - RBC - Analyst : Yes. That's all really good to hear, especially because that's what we're hearing from the hyperscale players who want an end-to-end solution on the cooling side. So if you have that with global scale, then you should see those, that type of growth. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 12:30PM, CARR.N - Q4 2024 Carrier Global Corp Earnings Call And just as a follow-up for Patrick, it's just, it's a headwind for everyone, but just kind of give us a sense of the setup on FX, the headwind? And just remind us about any type of hedging that you do.

Question: Deane Dray - RBC - Analyst : Great, thank you.

Question: Joe O'Dea - Wells Fargo - Analyst : Hi, good morning. Could you just talk about the sort of tariff considerations. I think you touched on China and said actions have been taken there. But as it relates to Mexico, just how you're approaching that situation and size it for us?

Question: Joe O'Dea - Wells Fargo - Analyst : I appreciate all that color. And then I wanted to ask on the HVAC margin bridge. So the up 50 bps to 75 bps. Can you just give a little bit more color on puts and takes there. When we think about Viessmann synergy, 454B mix, I presume at a pretty decent incremental productivity. It would seem like there's some building blocks to do better than that 50bps to 75bps. And so just any offsets to that?

Question: Joe O'Dea - Wells Fargo - Analyst : Got it. Thank you.

Question: Andrew Obin - Bank of America - Analyst : Hi, good morning. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 12:30PM, CARR.N - Q4 2024 Carrier Global Corp Earnings Call

Question: Andrew Obin - Bank of America - Analyst : Yes. You sort of highlighted this 1 percentage point of price for '25, if I'm correct. Are there any regions where you do not expect to get price or any verticals where price is flat to negative. I appreciate that the mix is in a softer bucket, but just any sort of discrepancy or pricing between regions or vertical. Thank you.

Question: Andrew Obin - Bank of America - Analyst : Thank you, And just a follow-up on aftermarket progress. I think you guys have provided some KPIs, but can you just give us an update, just a more thorough update on the progress, attachment rates, maybe service as a percent of commercial HVAC business. How is that initiative evolved because, before all the debate about i Viessmann, that was a key focus. It seems like you guys are making very good progress. If you could give us some numbers there. Thank you.

Question: Andrew Obin - Bank of America - Analyst : So where are we as a percent of commercialized (inaudible) revenues to date?

Question: Chris Snyder - Morgan Stanley - Analyst : Thank you. I wanted to ask about Americas resi, which, I think, a bit stronger 35% this quarter, I think the expectation was 20% to 30%. It sounds like the pre-buy would moderate, I guess, did that come in maybe a little bit ahead of where you thought three months ago? Was just kind of end demand stronger with some of the movement in the channel you're highlighting? Thank you.

Question: Chris Snyder - Morgan Stanley - Analyst : Thank you. I appreciate that. And then, Dave, I guess when you either talk to kind of your channel partners or the dealers. Is there any concern around the consumer and the homeowner and maybe pushing a little bit more towards repair versus replace or just trading down. Obviously, we're pushing through [return] change over 10% this year, normal price, low single digits. The whole resi ATEC industry is relying on Mexico. So it seems like there's probably another price increase potentially coming over the next 12 months. Are you hearing any of that? Is that a concern in your conversations? Thank you.

Question: Chris Snyder - Morgan Stanley - Analyst : Thank you guys I appreciate all that.

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

Question: Tommy Moll - Stephens - Analyst : Dave, I wanted to start on the comment you made about the movement for your resi channel in the quarter, up 15%. We've hit this from a couple of different angles, but I think it will attract a lot of attention today, so worth revisiting here. Are you able to share what the comp was last year? Or any other context that might help explain that comment you made. Thank you.

Question: Tommy Moll - Stephens - Analyst : Thank you, Patrick. Dave, just to anticipate another line of questions for all of us today. On your [K-12] commentary for the 10% price. There's been a lot of confusion there just because of things that is what's the base year we're all using and all kinds of noise around this one. But just to give you the opportunity, has anything changed there versus what you expected a quarter a couple quarters ago. And there's also been some questions around one of the larger players in the market potentially getting a little more aggressive on price. But really, the core of the question is what, if anything has changed?

Question: Tommy Moll - Stephens - Analyst : Thank you. I'll turn it back.

Question: Noah Kaye - Oppenheimer & Co. - Analyst : Thanks for taking the questions. You gave some good color on the VCS sales walk by line of business. I wonder if it would be possible to get a little bit better view at sort of country level dynamics or at least how you think about the rest of Europe versus Germany in the outlook, just kind of given the swing factor and policy for turn specifically?

Question: Noah Kaye - Oppenheimer & Co. - Analyst : Thanks, David. I'm glad you mentioned that because you started the call by talking about really this emphasis and the opportunity around the home energy management offerings. It was something you talked about, even in sort of the initial deal announcement. But if you could just give us a little bit more color on what you think this means for your wallet share or your expansion opportunity among the different channels that you already have it would be helpful. Not to steal too much thunder from Investor Day.

Question: Noah Kaye - Oppenheimer & Co. - Analyst : Thanks, Dave. I appreciate it.