Is Carrier Global a Smart Buildings Products & Equipment Stock to Own? HVAC company Carrier Global (CARR) has generated impressive returns over the past few months, relying on its broad portfolio of products and services...

HVAC company Carrier Global (CARR) has generated impressive returns over the past few months, relying on its broad portfolio of products and services and strategic alliances. However, with the stock hitting its $51.96 all-time high on Friday, does it have further upside to deliver? Let's find out.

One of the leading global providers of healthy, safe, and sustainable building and cold chain solutions, Carrier Global Corporation (CARR), in Palm Beach Gardens, Fla., operates through three segments: heating, ventilation, and air conditioning (HVAC); refrigeration; and fire & security. The company has played an important role in COVID-19 vaccine distribution, including launching Carrier Pods monitored by Sensitech, and developing the new Lynx digital platform in collaboration with Amazon.com, Inc.'s (AMZN) Amazon Web Services (AWS)..

Consequently, the stock has rallied 48.6% over the past nine months and 12.6% over the past month to close Friday's trading session at $51.90, after hitting its $51.96 all-time high.

CARR reported impressive first-quarter results, with sales driven primarily by continued strength in North American residential HVAC. Amid this favorable backdrop, the company raised its full-year outlook for 2021. It expects 7% - 10% sales growth, up from 6% - 8%, and its adjusted EPS is expected to come in between $1.95 - $2.05, up from $1.85 - $1.95. CARR also declared a $0.12 quarterly dividend, payable on August 10. So, its near-term prospects look promising.

Here are the factors that we think could shape CARR's performance in the upcoming months:

Positive Developments

On June 3, 2021, CARR's Carrier acquired a controlling stake of China-based Guangdong Giwee Group and its subsidiaries, including Guangdong Chigo Heating & Ventilation Equipment Co., Ltd. The acquisition is expected to help expand Carrier's access to the rapidly growing variable refrigerant flow (VRF) and light commercial market.

This month, CARR's Carrier Transicold equipped the road transport group Jacky Perrenot's first 100% electric vehicle (EV) from Renault trucks. The company's Chubb brand announced the launch of Chubb visiON+ on June 29—a range of complementary remote fire safety and security services for improved connectivity, responsiveness, and overall peace of mind. And CARR and the International WELL Building Institute (IWBI) collaborated in February to strengthen and accelerate the market transformation to healthy buildings.

Sales Growth Across All Segments

CARR's net sales increased 20.9% year-over-year to $4.70 billion for the first quarter ended March 31, 2021. The company's organic sales for the quarter increased 17% year-over-year. Its sales from the HVAC segment came in at $2.49 billion, up 26.9% year-over-year. While CARR's refrigeration segment sales increased 24.4% year-over-year to $1.01 billion, its sales by its fire & security segment increased 8.1% year-over-year to $1.30 billion.

In the first quarter, the company's net income increased 300% from the same period last year to $384 million. CARR's FCF came in at $131 million, representing a 244.7% sequential rise. And its non-GAAP EPS increased 37.1% year-over-year to $0.48. Also, it surpassed the Street's EPS estimates in three of the trailing four quarters.

Impressive Analyst Estimates

Analysts expect CARR's revenue to increase 23.3% year-over-year to $4.90 billion for the about-to-be-reported quarter ended June 30, 2021. Further, the company's revenue is expected to increase 10.8% in its fiscal year 2021 and 5.1% in fiscal year 2022. Its EPS is expected to increase 24.7% in the current year and 13% next year. And CARR's EPS is expected to grow at a 17.2% rate per annum over the next five years.

POWR Ratings Show Promise

CARR has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. Among these categories, CARR has a B grade for Sentiment. This is justified because among the 10 analysts who rated the stock, 8 rated it a Buy. The stock is also expected to hit $53 in the near term, which indicates a potential 2.1% upside.

CARR is ranked #9 of 54 stocks in the B-rated Industrial - Building Materials industry. Click here to see the additional POWR Ratings for CARR (Growth, Value, Momentum, Stability, and Quality).

Also, click here to access several other top-rated stocks in the same industry.

Click here to check out our Industrial Sector Report for 2021

Bottom Line

While the above-average temperature is driving increasing demand for CARR's HVAC products and services, the COVID-19 pandemic has led to increased attention around the importance of indoor air quality. This increased demand and the company's strategic acquisitions, and solid financials position the stock well to generate significant returns in the coming months. So, we think it could be wise to bet on the stock now.

CARR shares rose $0.29 (+0.56%) in premarket trading Monday. Year-to-date, CARR has gained 38.33%, versus a 18.44% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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