Q4 2023 Summary
Published Jan 10, 2025, 5:10 PM UTC- Carrier is well-positioned to capitalize on mega projects and data centers, with a central group targeting major customers and experiencing unbelievably strong demand in this area.
- The Viessmann acquisition is expected to be EBITDA-accretive, potentially exceeding the original business case, with activity picking up and synergies accumulating in the second half of the year.
- Carrier is seeing strong growth in China, particularly in the EV production and data center sectors, with a strategic shift from property to industrial markets, expecting high single-digit growth in China in 2024.
- Orders in the light commercial HVAC business are experiencing significant swings, with orders down 30% or 40% in certain quarters, indicating potential demand instability.
- The North American truck and trailer market is expected to decline by double digits in 2024, which may negatively impact Carrier's Refrigeration segment.
- Political uncertainty and regulatory delays in Germany have caused delays in orders for Viessmann Climate Solutions, potentially impacting growth in the first half of 2024.
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Viessmann Outlook
Q: How will Viessmann perform in 2024?
A: Management expects mid-single-digit sales growth for Viessmann in 2024, with sales weighted towards the second half due to increased heat pump demand and supply chain synergies. They anticipate EBITDA margins in the mid-teens, slightly accretive to the company's overall margins. , -
Residential HVAC Growth
Q: What's the 2024 outlook for residential HVAC?
A: Residential HVAC sales are expected to be up high single digits in 2024, with a few points of price and the rest from volume mix. Inventory levels have been reduced by 16% year-over-year, returning to normal levels and positioning the business for more typical sales patterns. , -
Heat Pump Demand
Q: What's driving heat pump demand in Europe?
A: Clarified German legislation with subsidies ranging from 40% to 70%, along with new EU regulations targeting 90% renewables by 2040, are boosting heat pump applications. Viessmann introduced new products covering over 90% of the single-family residential market, supporting expected growth in heat pump sales. , -
Commercial HVAC Orders
Q: How are commercial HVAC orders trending?
A: Orders remain robust, with strong demand from data centers, education, healthcare, and industrial projects. Orders in the Americas and Europe were up double digits, and management expects this strength to continue into 2024. , -
China Growth
Q: What are your expectations for China in 2024?
A: Despite weaker property markets, Carrier anticipates high single-digit growth in China due to strong demand in EV production, data centers, and infrastructure projects. Orders in China were up around 20% in the fourth quarter. -
Residential HVAC Inventory
Q: What's the status of residential HVAC inventory?
A: Inventory levels have been purposefully reduced by 16% year-over-year, achieving the target of mid-teens reduction. This sets the stage for more normal sales and movement alignment in 2024. -
Light Commercial Outlook
Q: What's the outlook for light commercial HVAC?
A: Light commercial HVAC sales are expected to be down mid-single digits in 2024 due to tough comparisons and some inventory adjustments, but coverage and backlog remain strong heading into the second quarter. -
Refrigeration Segment Growth
Q: What drives the growth in the Refrigeration segment?
A: Mid-single-digit organic growth is expected, driven by a strong rebound in the container business (growth north of double digits) and stability in truck and trailer markets, despite industry forecasts showing declines. -
Free Cash Flow Conversion
Q: What's the outlook for free cash flow conversion?
A: Carrier targets over 100% free cash flow conversion when adjusting for restructuring and M&A-related fees. Capital expenditures in 2024 will be elevated at around $550 million due to Viessmann projects, but underlying conversion remains strong. -
Fire and Security Exits
Q: What's the progress on exiting Fire and Security businesses?
A: Carrier is prioritizing closing the security and commercial refrigeration exits, aiming to announce a deal for industrial fire within months. Preparation for commercial and residential fire exits is ongoing, considering options for sale or public market exit to maximize shareholder value.