Carrier Global Corp (CARR) - Stock Report

Q1 2026 sales were $5.341bn, up 2% reported but down 1% organic; reported diluted EPS from continuing operations was $0.28, down 40% year over year, and company-reported adjusted diluted EPS was $0.57 versus $0.65 in Q1 2025, down 12% on the same adjusted basis. Reported operating profit fell to $259m from $629m, while company-reported adjusted operating profit fell to $594m from $848m. The cash read for the quarter was weak: Carrier-defined company-reported free cash flow was negative $15m after $79m of operating cash flow and $94m of capital expenditures, while dividends and repurchases returned about $500m to shareholders in the quarter. The company reaffirmed FY2026 guidance for about $22bn of sales, organic sales flat to up low-single digits, about $3.4bn of company-reported adjusted operating profit, about $2.80 of adjusted EPS, and about $2.0bn of company-reported free cash flow.

The key macro issue is not construction exposure in isolation, but whether the residential and distributor-inventory cycle passes through factory absorption, price-cost and working capital into free cash flow: if stabilization coincides with profitable data-center cooling and service attachment, Carrier can delever from the roughly $2.0bn 2026 free-cash-flow guide toward a stronger cash base; if under-absorption, Europe promotion or China RLC weakness persist, the same portfolio quality leaves shareholders paying for cash conversion that has not yet been proven.

Carrier sells and services HVAC, refrigeration, controls and monitoring systems across residential, commercial, data-center and transport markets. The portfolio is materially different from the pre-2024 company: Access Solutions, Industrial Fire, Commercial Refrigeration and Commercial and Residential Fire have been sold, Viessmann Climate Solutions was acquired in January 2024, and Riello is under a pending sale to Ariston for expected gross proceeds of about $430m.

The practical owner question is not whether climate and energy efficiency are attractive end markets. It is whether Carrier can turn equipment volume, installation relationships and management's 28% parts-and-service mix into durable post-capex cash while carrying a debt load that was increased by the Viessmann acquisition and then partly reduced with divestiture proceeds.

The company reports four operating segments: Climate Solutions Americas, Climate Solutions Europe, Climate Solutions Asia Pacific, Middle East & Africa, and Climate Solutions Transportation. In 2025, total net sales were $21.747bn; management classified 72% as new equipment and 28% as parts and service, but that is broader than the SEC product/service presentation because replacement parts sit inside product sales. The 10-K product/service presentation shows 2025 service sales of $2.574bn, about 12% of sales, and the Q1 2026 10-Q showed service sales of $674m on $5.341bn of total sales. International operations represented about 52% of 2025 net sales, making regional demand, currency and regulation operating issues rather than footnotes.