Q1 2024 Summary
Published Jan 10, 2025, 5:10 PM UTC- Carrier's container business experienced significant recovery, with sales up 50% in Q1 and expected full-year growth around 30%. This strong performance is complemented by the introduction of the new digital platform Lynx, which has garnered 130,000 subscriptions and generated subscription-based recurring revenues.
- Light Commercial HVAC sales are outperforming expectations, increasing over 20% in Q1. Management sees upside to original guidance due to strong performance in key verticals like K-12 education, healthcare, and value-based retail, along with market share gains driven by technology differentiation.
- Carrier is capitalizing on strong global demand for data centers, a key growth driver for the applied HVAC segment. Data centers are "very, very strong" globally, and the company expects this trend to continue, benefiting from growth in AI and related cooling needs.
- Light commercial HVAC orders were down significantly in Q1, declining roughly 35%, which could indicate potential weakness in future sales.
- Viessmann Climate Solutions reported operating margins of approximately 12.5% in Q1, below the HVAC segment average, resulting in margin dilution and raising concerns about the path to higher margins.
- The adoption of new refrigerant units (454B) is expected to be slower than previously anticipated, which may impact sales volumes and the realization of expected price increases.
-
CEO Commitment
Q: Will you stay at Carrier or are you considering leaving?
A: Dave Gitlin stated he is 100% committed to Carrier and has removed his name from consideration as Boeing's CEO. He is excited about the transformational journey at Carrier and plans to continue leading the company. -
Fire Business Sale
Q: What's the update on selling the fire business?
A: Carrier is prioritizing the sale of its residential and commercial fire business, expecting to issue an offering memorandum in two weeks and aiming to close by year-end. The business is performing extremely well, with EBITDA tracking much higher than last year. -
Viessmann Integration
Q: How is the Viessmann acquisition progressing amid European market conditions?
A: Viessmann is performing well, introducing new products expanding the TAM by $5 billion. Despite market challenges, they expect heat pump orders to pick up in May and June, positioning for the heating season. They are aggressively managing costs and anticipate revenue synergies in the hundreds of millions. -
Refrigerant Transition Pricing
Q: What's the impact of A2L refrigerant transition on pricing?
A: Carrier reaffirms a 15–20% price increase over two years due to the A2L transition. They are already shipping A2L units and expect a higher than 60% mix of new refrigerant units next year. -
Data Center Growth
Q: Can you discuss Carrier's position in the data center market?
A: Carrier is experiencing exponential growth in data centers, with backlog doubling. They have low share in the U.S. but are well-positioned technologically and are expanding capacity. Investments in liquid cooling and a dedicated team are helping them capitalize on this unique market moment. -
Productivity and Margins
Q: How sustainable is the productivity improvement seen in Q1?
A: Carrier feels it's the best since Dave Gitlin has been at the company. They achieved 100% incrementals, with materials contributing 50% of productivity. They are confident in sustaining gains and offsetting material costs. -
Light Commercial HVAC Trends
Q: What's the outlook for light commercial HVAC in Americas?
A: Despite a significant drop in orders, Carrier expects performance better than initial guidance of down mid-single digits. Strength in key verticals and share gains are contributing factors. -
European Heat Pump Competition
Q: Are new entrants threatening Viessmann's heat pump market share in Europe?
A: Viessmann, a top German brand, plays in the premium market and is less impacted by low-cost competitors. The combination with Carrier enhances their position, and they are seeing price tailwinds. -
Applied HVAC Strengths
Q: Beyond data centers, what's driving applied HVAC demand?
A: Applied growth is supported by strong verticals like higher education and healthcare. While commercial office remains weak, data centers and other sectors continue to drive demand globally. -
Container Business Recovery
Q: Is the container business on the rebound?
A: Yes, container sales were up about 50% in Q1. They expect full-year growth around 30%, aided by new digital offerings generating subscription-based recurring revenue.