JPMorgan raises Carrier Global stock rating to overweight

On Wednesday, JPMorgan analysts upgraded Carrier Global (NYSE:CARR) stock from Neutral to Overweight, adjusting the price target slightly upward to $78 from $77. The upgrade comes amid a backdrop of uncertainty in the HVAC industry, with Carrier’s valuation reaching record relative lows compared to its peers, who face similar uncertainties but are trading at a premium. According to InvestingPro data, Carrier trades at a P/E ratio of 10.1x, notably low relative to its near-term earnings growth potential. The stock currently shows a moderate overall Financial Health score, with particularly strong marks in profitability metrics.

Carrier Global’s guidance, though not seen as conservative by the analysts, is considered achievable, suggesting an end to the revision cycle. The company has faced challenges, including an underdeveloped services business and exposure to tariffs in Mexico. However, recent trends indicate less drag from demand in the channel than anticipated, with Carrier showing a more balanced position and not benefiting as much from market share donated by Daikin. InvestingPro analysis reveals strong fundamentals, with revenue growing 18.7% in the last twelve months and a solid current ratio of 1.25, suggesting adequate liquidity to manage near-term obligations.

Despite competitive pressures and being viewed as a laggard compared to Trane, Carrier’s recent order rates suggest a different scenario. The analysts also take a conservative stance on Viessmann, noting potential for a goodwill charge on its Europe assets if there is no recovery. Still, the margin expansion guidance of 100 basis points, following a core expansion of around 250 basis points in 2024, hints at possible conservatism in the company’s financial outlook.

Carrier has already announced a price increase effective March 1 to address tariff impacts, and JPMorgan views this as a strategic hedge. While free cash flow remains below 100% conversion, the stock’s pullback from its highs and its flat performance since mid-2023 positions it as an attractive investment compared to HVAC peers with similar risks and opportunities.

The analysts conclude that although the sector is not yet cheap enough to fully commit to, Carrier’s stock is undervalued on a sum-of-the-parts basis. This disconnect between the perceived fundamentals of Carrier versus its peers is expected to converge over time, leading JPMorgan to adopt a more favorable stance on the stock. InvestingPro data shows analyst targets ranging from $53 to $95, with a consensus recommendation of 2.04 (Buy). For deeper insights into Carrier’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, which includes detailed analysis of the company’s financial health and market position among its Building Products industry peers.

In other recent news, Carrier Global Corporation reported strong fourth-quarter earnings, with adjusted earnings per share of $0.54, exceeding analyst expectations of $0.49. The company achieved a revenue of $5.15 billion, slightly below the consensus estimate of $5.27 billion, but still reflecting a 19% year-over-year increase, including 6% organic growth. Carrier projects its adjusted earnings per share for 2025 to be between $2.95 and $3.05, aligning closely with analyst predictions of $2.99, and anticipates revenue in the range of $22.5 to $23 billion. In a strategic move, Carrier has also made a significant investment in ZutaCore, a company specializing in advanced liquid cooling technology for data centers, as part of its efforts to meet the growing demands of high-density computing.

Additionally, Wolfe Research upgraded Carrier Global’s stock rating from ’Peer Perform’ to ’Outperform,’ setting a new price target of $80. This reflects a renewed confidence in the company’s prospects following a period of strategic recalibration. Mizuho (NYSE:MFG) Securities also raised Carrier Global’s stock rating to ’Outperform,’ maintaining a price target of $78, citing the company’s robust free cash flow and growth potential as key factors. These upgrades come as Carrier Global’s shares are noted to be trading at a discount compared to its HVAC industry peers, despite strong financials and market position. The company’s ongoing strategic initiatives and positive earnings outlook have contributed to a favorable assessment from analysts.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.