CARRIER GLOBAL Corp Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Strategic Progress: 2025 was an important year with progress on strategic priorities, including growing data center business to ~$1B. Commercial HVAC had fifth consecutive year of double-digit growth, and aftermarket was up double digits for fifth consecutive year. Offset tariffs with cost and pricing actions, drove material productivity, and took overhead cost actions.
• Data Center Investments: Fourth quarter CSA data center orders up over five times, expanded portfolio for data center chillers, share of water-cooled chillers increased four times since spin, and introduced Maglev bearing air-cooled chillers.
• Aftermarket: Over 70,000 chillers connected, attachment rate in CSA grew over three times, global coverage up to 110,000, modifications and upgrades sales up 20% in 2025.
• Systems Offering: HEMS offering in US and Europe, planning market launch of integrated heat pump battery solution, doubled qualified Prophy installers in 2026.
• CST Business: Container business with over 220,000 paid link subscriptions, invested in NetVaso for wireless IoT connectivity, end-to-end solution expected to provide recurring revenues.

Segment Performance

• CSA Segment: In Q4, organic sales were down 17%. Commercial sales were up 12%, but this was offset by lower resi and light commercial sales. Resi sales were down close to 40% with volume down over 40%, and light commercial sales declined 20%. Segment operating margin was just under 9%, a decline of about 10 points versus the prior year. For the full year, CSA Commercial had sales up over 25% while resi was down 9% and light commercial down 20%.
• CSE Segment: Organic sales were down 2% in Q4, with commercial up mid-single digits and resi and light commercial down mid-single digits. Segment operating profit and margin were up year over year due to cost actions.
• Climate Solutions Asia Pacific (CS AME): Sales were down 9% in Q4, with strength in India and Australia offset by weakness in China. Segment operating margin was about 12%, up 100 basis points.
• Transportation Segment: Had 10% organic sales growth in Q4, driven by container. Global truck and trailer was flat in the quarter, and segment operating margins expanded by 30 basis points.

Guidance

• Revenue: Expect flat to low mid-single digit organic growth in 2026, reported sales ~$22B. Commercial HVAC globally expected to have first half low to mid-single digits growth and second half mid-teens growth.
• Profit and Cash: Total company adjusted operating profit expected to be ~$3.4B, free cash flow ~$2B, intend to repurchase ~$1.5B in shares. Adjusted EPS expected ~$2.8, up high single digits vs 2025.

Risks

• Market Volatility: Softness in short cycle residential and light commercial markets impacted sales and margins.
• Supply Chain: Commodity price fluctuations (e.g., copper, steel, aluminum) can impact costs.
• Regulatory Uncertainty: Uncertainty in regulatory environments (e.g., heating laws in Germany) and macroeconomic factors affecting demand.

Q: What's the expectation on channel inventories in CSA resi?

A: David Gitlin said channel inventories in CSA resi ended January down about 30-32%, at 2018-type levels.

Q: How does the data center business look for 2026?

A: David Gitlin said guiding to $1.5B revenue for data center in 2026, with strong orders and good positioning.

Q: Talk about the CSE RLC market for 2026.

A: David Gitlin said industry in Europe will be down mid to high single digits, but guided to flat due to mix up (heat pumps up double digits, boilers down) and aftermarket growth, though German market uncertainty is a factor.