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Why Shares in Carrier Global Surged in November

By Lee Samaha - Dec 3, 2020 at 8:53AM

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The heating, ventilation, and air conditioning specialist is benefiting from very positive near- and long-term trends.

What happened

Shares in heating, ventilation and air condition (HVAC) company Carrier Global ( CARR -0.96% ) rose 14% in November according to data provided by S&P Global Market Intelligence. The move builds upon an excellent set of third-quarter results released at the end of October, plus positive sentiment around a COVID-19 vaccine.

The earnings report saw management raise its full-year sales, profit, and free cash flow guidance for the second time this year. As you can see below, the industrial company has recovered well from the shock of the coronavirus pandemic. Indeed, the stay-at-home measures encouraged households to purchase air conditioning units, so North American HVAC sales were up 46% in the third-quarter -- overall HVAC sales increased 11%.

Carrier Full-Year 2020 Guidance

At October 

At July 

At May


$17.3 billion

$15.5 billion to $17 billion

$15 billion to $17 billion

Adjusted Operating Profit

$2.2 billion

$1.8 billion to $2 billion

$1.7 billion to $2 billion

Free Cash Flow

$1.5 billion

At least $1.1 billion

More than $1 billion

Data source: Carrier Global.

In addition, the near-term outlook is very good as Carrier's total year-over-year orders increased 15% in the third quarter with residential and light commercial HVAC orders up a whopping 60% and transport refrigeration up 30%. The strong orders growth in those businesses more than offset a 10% decline in fire and security orders and a similar decline in commercial refrigeration. Commercial HVAC orders were flat year over year.

In addition to the stronger-than-expected sales, earnings, and FCF performance in 2020, management has also upgraded its target for cost cutting. Having initially planned to cut its annual costs by $600 million by 2022, management is now aiming for $700 million.

So what

The boost to residential HVAC sales will lead to more aftermarket sales in the future, so investors shouldn't think of it as simply being a one-off event in 2020. Moreover, the pandemic, or more precisely distributing the vaccine, is creating an exciting growth opportunity for Carrier's transport refrigeration solutions. As a reminder, most high-profile vaccines will require refrigerated transportation and storage.

A couple enjoying air conditioning.

Image source: Getty Images.

If rolling out the vaccine spurs global investment in building out cold chain capability, particularly in developing countries, then Carrier is likely to be a beneficiary for many years to come

Now what

Investors will want to see Carrier execute on its cost-cutting plans while fully taking advantage of any opportunity from the rollout of a COVID-19 vaccine. In addition, the focus on cleaner, healthier buildings created by the pandemic is likely to encourage investment in commercial HVAC. Simply put, Carrier has an exciting future ahead of it.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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