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CARRIER GLOBAL Corp (CARR)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $5.58B, down 7% y/y, with organic sales down 4%; adjusted EPS was $0.67 as Commercial HVAC Americas grew 30% but Residential Americas fell ~30% and channel destocking weighed on margins .
  • Results were better than consensus on EPS and slightly above on revenue: adjusted EPS $0.67 vs $0.57 consensus; revenue $5.58B vs $5.55B consensus. Management cited a discrete tax-rate benefit (~$0.07, ~$0.05 timing) and cost actions as partial offsets to Residential weakness. Bold beat on EPS; slight beat on revenue .*
  • Full-year guidance cut: sales to ~$22B, adjusted operating margin to 15.0–15.5%, adjusted EPS to ~$2.65, and FCF to ~$2B, reflecting RLC weakness in Americas/Europe; Commercial Americas expected >25% growth in 2025 .
  • Capital return catalyst: new $5B repurchase authorization (total authorization now ~$5.8B); company still expects ~$$3B of repurchases in 2025; quarterly dividend declared $0.225 per share on Oct 8, 2025 .

Note: “*” marks values retrieved from S&P Global.

What Went Well and What Went Wrong

  • What Went Well

    • Commercial HVAC Americas up 30% with strong applied equipment (+60%), controls (+~20%), and aftermarket (+mid-teens); data center revenue on track to double to ~$1B in 2025 with backlog expected near ~$900M exiting the year .
    • Aftermarket sales up 12% y/y; connected chillers up 30%; Linx paid subscriptions +40% to ~210,000, underscoring durable service and digital growth vectors .
    • Structural cost actions: ~3,000 indirect positions targeted for removal; management emphasized AI-enabled back-office efficiency (20,000 Copilot licenses) to ensure cost-out “comes out and stays out” .

  • What Went Wrong

    • Residential Americas down ~30% as volumes fell ~40% and distributors destocked; CSA segment margin compressed 560 bps to 19.7% on under-absorption and weaker volumes .
    • Europe RLC remains soft with markets (e.g., Germany) at 15-year lows; while heat pump sales rose (+15% Europe; ~+45% Germany), the boiler decline and mix pressures reduced CSE margin by 110 bps .
    • China RLC continued to lag mid-teens; CSAME margin down 100 bps; inventories rose sequentially (net +$500M consolidated, ~$350–400M in CSA resi) requiring balancing of production, labor absorption, and cash .

Financial Results

Consolidated performance vs prior periods and estimates

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$5.218 $6.113 $5.579
GAAP EPS (Continuing)$0.47 $0.70 $0.47
Adjusted EPS (Continuing)$0.65 $0.92 $0.67
Operating Margin % (GAAP)12.1% 14.8% 9.7%
Adjusted Operating Margin %16.2% 19.1% 14.8%
Organic Sales Growth %+2% +6% (4)%
Estimates vs ActualsQ1 2025Q2 2025Q3 2025
Revenue – Consensus ($MM)5,186.6*6,098.1*5,551.6*
Revenue – Actual ($MM)5,218 6,113 5,579
Surprise ($MM)+31.4*+15.9*+27.4*
Adjusted EPS – Consensus ($)0.584*0.903*0.569*
Adjusted EPS – Actual ($)0.65 0.92 0.67
Surprise ($)+0.066*+0.017*+0.101*

Values retrieved from S&P Global.

Segment breakdown

SegmentNet Sales ($MM) Q1 2025Net Sales ($MM) Q2 2025Net Sales ($MM) Q3 2025Segment Margin % Q1 2025Margin % Q2 2025Margin % Q3 2025
Climate Solutions Americas (CSA)2,572 3,252 2,711 22.2% 27.0% 19.7%
Climate Solutions Europe (CSE)1,169 1,253 1,290 9.0% 7.9% 9.3%
CS Asia Pacific, Middle East & Africa (CSAME)826 882 833 14.6% 15.3% 11.6%
Climate Solutions Transportation (CST)651 726 745 14.9% 17.6% 15.4%

KPIs and balance sheet/cash flow

KPIQ1 2025Q2 2025Q3 2025
Cash from Operations ($MM)$483 $649 $341
Free Cash Flow ($MM)$420 $568 $224
Net Debt ($MM)$9,486 $9,646 $10,493
Inventories, Net ($MM)$2,648 $2,888 $3,004
Diluted Shares (MM)878.3 866.3 858.6

Non-GAAP adjustments (Q3)

  • Adjustments to operating profit included: amortization of acquired intangibles ($221MM), restructuring ($50MM), acquisition/divestiture-related costs ($13MM), defined benefit pension settlement ($11MM), yielding adjusted operating profit $823MM and adjusted EPS $0.67 .

Guidance Changes

MetricPeriodPrevious Guidance (7/29/25)Current Guidance (10/28/25)Change
Sales ($)FY 2025~$23B ~$22B Lowered
Adjusted Operating Margin %FY 202516.5%–17.0% 15.0%–15.5% Lowered
Adjusted EPS ($)FY 2025$3.00–$3.10 ~$2.65 Lowered
Free Cash Flow ($)FY 2025$2.4–$2.6B ~$2.0B Lowered
Adjusted Effective Tax Rate %FY 2025N/A~21% New/Updated
Share Repurchases ($)FY 2025N/A~$3B expected New/Confirmed
Repurchase Authorization ($)OngoingN/A+$5B (total auth. ~$5.8B) New
Dividend ($/share)Nov 18, 2025N/A$0.225 declared Oct 8 Confirmed/Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2025)Trend
Data centersQ1: backlog +10% y/y; investments in applied capacity; Q2: Commercial Americas +45%; container growth; reaffirm guidance .Revenue set to double to ~$1B in 2025; backlog targeted near ~$900M entering 2026; large wins with hyperscalers/colo .Strengthening
Residential AmericasQ1: resi +~20% . Q2: resi up >10% .Resi sales down ~30%; volume down ~40%; destocking to end-2025; field inventories targeted -30% y/y (2018 levels) .Deteriorated near term; normalization expected post destock
Europe RLC/Heat pumpsQ1: organic down 7%; margin −390 bps; boiler drag . Q2: flat organic; productivity offsets .Heat pumps up ~15% Europe; ~45% Germany; ETS2 2027 supports electrification; but boiler weakness persists; margin −110 bps .Mixed: structural shift to heat pumps, market units at lows
China RLCQ1 & Q2: weakness noted .Continued mid-teens decline; working with partners to reduce field inventories .Weak
Cost actions/AIQ1/Q2: productivity, synergies .~3,000 indirect positions; AI-enabled back-office; 20,000 Copilot licenses; >$100MM carryover savings expected in 2026 .Accelerating
Pricing/tariffsQ1: “fully mitigating tariffs” . Q2: incremental pricing for tariffs reduced to ~$200MM .2026 price realization low single digits; tariffs/pricing expected net-neutral carryover; 2025 tariffs offset with ~$200MM pricing .Moderating price tailwind
Government/LC impactsN/A.U.S. light commercial softer; SBA loan processing delays during shutdown cited .Near-term headwind

Management Commentary

  • “Q3 was generally in line… North American resi softness created about a $500M sales challenge and a 20%–25% adjusted EPS headwind… offset by Commercial HVAC Americas up 30%, aftermarket traction, cost containment, and a discrete tax benefit” — CEO David Gitlin .
  • “We booked our largest order ever… securing another major win with a key hyperscaler… Connected chillers were up 30%… Linx paid subscriptions… up 40% to about 210,000” — CEO David Gitlin .
  • “Aggressive cost actions… elimination of about 3,000 indirect positions… using AI… 20,000 Copilot licenses… 100% focused on structural cost takeout that comes out and stays out” — CEO David Gitlin .
  • “We expect full-year adjusted EPS of about $2.65… adjusted effective tax rate closer to 21%… free cash flow of about $2B… and about $3B of share repurchases this year” — CFO Patrick Goris .

Q&A Highlights

  • Inventory and destocking: Consolidated inventories up ~$500MM, ~$350–400MM in CSA resi; deliberate field inventory reduction to finish 2025 ~30% below prior year; goal to start 2026 without further destocking headwinds .
  • Pricing and elasticity: 2026 price increase announcement planned; realization expected low single digits; careful monitoring of repair vs replace dynamics to avoid demand destruction .
  • Margins and 2026 bridge: $0.20 EPS tailwind in 2026 from restructuring carryover ($0.10), lower tax (~100 bps), and repo; CSA margins expected up in 2026 unless resi is “significantly down” .
  • Data center backlog: Target backlog entering 2026 around ~$900MM to support continued growth; 2025 revenue ~ $1B; strong wins across regions .
  • Segment order trends: CSD orders strong (container +~100%, truck/trailer +~25%); CSE commercial expected to pick up given pipeline and DC projects .

Estimates Context

  • Q3 2025: adjusted EPS $0.67 vs $0.569 consensus; revenue $5.579B vs $5.552B consensus — EPS beat driven by Commercial strength, cost actions, and a discrete tax-rate benefit (~$0.07, ~$0.05 timing). Bold beat on EPS; slight beat on revenue .*
  • Trajectory: Q1 and Q2 were modest beats; the magnitude of Q3 EPS beat likely reflects the lower tax rate and Opex discipline amid resi weakness.*
  • Implications: Street models should reduce FY revenue/EPS/OM to current guide; consider higher 2026 EPS bridge (restructuring, tax, repo) and DC backlog visibility; Residential normalization timing remains key.*

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Commercial HVAC (esp. data centers) and aftermarket remain secular growth pillars; DC revenue doubling to ~$1B in 2025 with backlog set to support growth into 2026 .
  • Residential Americas correction is sharper than expected; destocking should largely complete by year-end, setting up for cleaner 2026 compares but Q4 and early Q1 carry absorption and margin headwinds .
  • Guidance reset lowers FY 2025 baseline; focus shifts to 2026 build: ~$0.20 EPS tailwind from cost/tax/repo plus DC momentum; CSA margins likely up in 2026 absent a further resi decline .
  • Capital return accelerant: new $5B buyback authorization (total ~$5.8B) and ~$3B 2025 repurchases support per-share metrics; dividend maintained ($0.225 declared for Nov 18) .
  • Watch Europe: heat pump adoption is strong (~+15% EU; ~+45% Germany) and ETS2 supports electrification, but boiler/unit market at multi-decade lows — margin recovery depends on mix/volume normalization .
  • China RLC remains weak; inventory actions underway — monitor regional demand and LC trends, including U.S. SBA-related delays impacting small-business demand .
  • Near-term trading: Expect continued volatility around resi datapoints and Q4 under-absorption; positive catalysts include large DC wins/backlog updates, evidence of resi movement stabilization, and additional detail on structural cost savings .

Bold beats/misses: Q3 adjusted EPS beat vs consensus; slight revenue beat.*

Additional references: Q3 press release and 8-K include full reconciliations and guidance revisions .