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Introduction & Market Context
Carrier Global Corporation (NYSE:CARR) reported strong first-quarter 2025 results on May 1, with significant earnings growth and improved guidance for the full year. The climate and energy solutions provider saw its shares rise 3.9% in premarket trading to $64.98, reflecting positive investor reaction to the results.
The company delivered adjusted earnings per share of $0.65, representing a 27% increase year-over-year, despite a 4% decrease in reported sales to $5.22 billion. Organic sales growth of 2% was offset by a 5% impact from acquisitions and divestitures and a 1% headwind from foreign exchange.
Quarterly Performance Highlights
Carrier achieved substantial margin expansion in Q1, with adjusted operating profit increasing 10% to $843 million and adjusted operating margin improving by 210 basis points to 16.2%. Free cash flow showed remarkable improvement, reaching $420 million compared to a $64 million outflow in the same period last year.
As shown in the following summary of Q1 2025 performance:
The company reported high single-digit organic order growth, driven by double-digit increases in Climate Solutions Europe and Climate Solutions Transportation. Total (EPA:TTEF) company backlog grew over 15% sequentially and approximately 10% year-over-year, positioning Carrier well for continued growth through 2025.
Segment performance varied significantly across regions. Climate Solutions Americas delivered exceptional results with 9% organic sales growth and a 420 basis point margin expansion to 22.2%, driven by strong residential and commercial sales, both up approximately 20%.
The following table details the Climate Solutions Americas performance:
In contrast, Climate Solutions Europe faced challenges with organic sales declining 7%, though management noted this was in line with expectations. Despite the sales decline, the segment showed promising signs of recovery with mid-teens order growth and a 60% sequential increase in backlog.
As illustrated in this chart of Europe’s order intake and backlog growth:
Climate Solutions Asia Pacific Middle East & Africa continued to face headwinds in China, where sales declined by low double digits. However, strong productivity and favorable currency comparisons helped drive a 240 basis point improvement in operating margin to 14.6%.
Climate Solutions Transportation reported 2% organic sales growth despite a 26% decline in reported sales due to divestitures. Container sales increased approximately 20%, while global truck and trailer sales declined by low single digits.
Strategic Initiatives
Carrier highlighted several strategic initiatives that contributed to its strong performance in Q1. The company continued to leverage its acquisition of Viessmann, selling Carrier-branded air-to-air heat pumps in Europe through Viessmann’s distribution channels. Management reported that the integration is on track to deliver approximately $100 million in incremental revenue synergies in 2025 and over $200 million in cumulative cost synergies by 2026.
The following slide outlines Carrier’s progress on strategic focus areas:
Aftermarket growth remains a key priority, with global aftermarket sales increasing 8% in Q1. The company reported that its chiller attachment rate exceeded 60%, up from 48% in Q4 2024, demonstrating success in expanding service offerings. Carrier also launched a smart device application for its LYNX Fleet, offering real-time visibility for transportation refrigeration customers.
Product innovation continued with the introduction of Carrier’s first energy-efficient, air-cooled commercial heat pump using low-GWP refrigerant in Europe. The company also partnered with Google (NASDAQ:GOOGL) Cloud to strengthen grid resilience with AI-powered Home Energy Management Systems (HEMS).
Forward-Looking Statements
Based on its strong Q1 performance, Carrier raised its full-year 2025 guidance. The company now expects sales of approximately $23 billion, up from its previous range of $22.5-$23.0 billion, with organic growth in the mid-single digits.
As shown in the updated sales guidance by segment:
Adjusted EPS guidance was increased to $3.00-$3.10, up from $2.95-$3.05, representing 17-21% growth year-over-year. Free cash flow expectations remain unchanged at $2.4-$2.6 billion.
The following slide details Carrier’s updated profit and cash guidance:
Management addressed the potential impact of tariffs, noting that the guidance reflects full mitigation of tariffs currently in effect through supply chain actions, increased productivity, cost containment, and incremental pricing of approximately $300 million. The company is also taking additional cost reduction measures but noted that the impact of further tariff escalation and potential economic downturn is excluded from the guidance.
This bridge chart illustrates the components driving EPS growth from 2024 to 2025:
Analyst Perspectives
While specific analyst reactions to the Q1 2025 results were not included in the presentation, the company’s performance appears to align with the positive momentum noted in previous quarters. In Carrier’s Q3 2024 earnings call, management had expressed optimism about 2025, forecasting strong growth driven by investments in intelligent climate and energy solutions.
The Q1 results validate this outlook, with particularly strong performance in the Americas region and signs of recovery in Europe. The company’s ability to expand margins significantly despite mixed organic sales growth demonstrates effective execution of productivity initiatives and cost synergies from the Viessmann acquisition.
Conclusion
Carrier’s Q1 2025 results reflect a strong start to the year, with significant earnings growth and margin expansion despite mixed sales performance across regions. The company’s strategic initiatives, particularly in aftermarket growth and the Viessmann integration, are showing positive results. With increased guidance for the full year and a growing backlog, Carrier appears well-positioned for continued growth in 2025.
The company announced it will host an Investor Day on May 19, 2025, in New York City, where management will present strategic initiatives to accelerate growth. Key topics will include growth drivers, margin expansion, and capital allocation strategies.
Full presentation:
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