# Carrier Global (CARR) Financial Model Free Excel 3-statement financial model and company analysis for Carrier Global. - Canonical: https://finamodel.com/companies/carrier-global - Industry: Building Products - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/CARR.xlsx ## Model Purpose This model provides a comprehensive equity valuation and scenario planning tool for an equity research analyst assessing Carrier Global Corporation following its massive 2024 portfolio transformation into a pure-play climate and energy solutions company. ## Company Overview Carrier Global Corporation is a premier global provider of intelligent climate and energy solutions, encompassing heating, ventilation, air conditioning (HVAC), and transport refrigeration. Following a historic portfolio transformation completed in late 2024, the company divested its Fire & Security and Commercial Refrigeration businesses while acquiring Viessmann Climate Solutions for €12 billion to pivot entirely toward sustainable climate technologies. As of the first quarter of 2025, Carrier updated its reporting structure to reflect this pure-play focus. The business segments are: - Climate Solutions Americas (approximate revenue contribution 50-55%) - Climate Solutions Europe (approximate revenue contribution 25-30%, significantly boosted by Viessmann) - Climate Solutions Asia Pacific Middle East & Africa (approximate revenue contribution 10-15%) - Climate Solutions Transportation (approximate revenue contribution 5-10%) Carrier operates an increasingly asset-light manufacturing model with a strong emphasis on growing its high-margin, recurring aftermarket services and digitally enabled lifecycle solutions. The company holds leading market shares globally, competing primarily with Trane Technologies, Johnson Controls, Lennox, and Daikin. The recent strategic overhaul has fundamentally changed the company's growth profile, removing lower-growth industrial segments to focus on secular tailwinds in energy transition, heat pumps, and data centre cooling. ## Revenue Deep Dive ### Climate Solutions Americas - **Segment name:** Climate Solutions Americas - **Revenue driver formula:** (Residential Equipment Volume x Average Selling Price) + (Commercial Equipment Volume x Average Selling Price) + Aftermarket Services Revenue - **Historical growth rate:** High single-digit organic growth recently (Commercial up nearly 20% in late 2024). - **Key growth levers and headwinds:** Data centre cooling demand, institutional commercial HVAC upgrades, and residential replacement cycles. Headwinds include distributor destocking and interest rate impacts on new residential construction. - **Pricing dynamics:** Highly competitive but rational; Carrier has successfully pushed through price increases to offset inflation. - **Revenue recognition notes:** Equipment recognised at point of sale; long-term aftermarket service contracts recognised over time. - **Seasonality:** Strongest in Q2 and Q3 due to peak cooling season in North America. ### Climate Solutions Europe - **Segment name:** Climate Solutions Europe - **Revenue driver formula:** Legacy Carrier Europe Revenue + Viessmann Climate Solutions Revenue + Aftermarket Services - **Historical growth rate:** Mid-to-high single digits (pro-forma for Viessmann). - **Key growth levers and headwinds:** European energy transition, government subsidies for heat pump adoption, and the direct-to-installer channel advantage gained from Viessmann. Headwinds include European macroeconomic softness and regulatory delays. - **Pricing dynamics:** Premium pricing supported by Viessmann's brand positioning and high-efficiency renewable solutions. - **Revenue recognition notes:** Standard point-in-time for equipment. - **Seasonality:** Stronger in Q3 and Q4 ahead of the winter heating season. ### Climate Solutions Asia Pacific Middle East & Africa - **Segment name:** Climate Solutions Asia Pacific Middle East & Africa - **Revenue driver formula:** Regional Equipment Volume x Average Selling Price + Aftermarket Services - **Historical growth rate:** Mid single-digit organic growth. - **Key growth levers and headwinds:** Urbanisation in India and the Middle East, offset by sluggish property markets in China. - **Pricing dynamics:** Highly competitive, particularly against local Asian manufacturers like Daikin and Midea. - **Revenue recognition notes:** Standard point-in-time for equipment. - **Seasonality:** Varies by specific region, but generally steady throughout the year. ### Climate Solutions Transportation - **Segment name:** Climate Solutions Transportation - **Revenue driver formula:** Truck/Trailer Unit Volume x Price + Shipping Container Unit Volume x Price + Aftermarket - **Historical growth rate:** Low-to-mid single digits (cyclical). - **Key growth levers and headwinds:** Global cold chain logistics demand, pharmaceutical transport needs, and truck replacement cycles. Headwinds include freight market recessions. - **Pricing dynamics:** Contractual with major fleet operators and shipping lines. - **Revenue recognition notes:** Point of sale upon delivery of refrigeration units. - **Seasonality:** Relatively balanced, slight uptick in Q2 ahead of summer agricultural transport. ## Cost Structure ### Variable Costs / COGS - COGS consists primarily of raw materials (copper, steel, aluminium), components (compressors, motors), direct manufacturing labour, and outbound freight. - Gross margin range has historically been 25% to 28%, expanding recently due to productivity initiatives and the higher-margin Viessmann acquisition. - Input costs are highly exposed to base metal commodities; Carrier uses forward contracts to hedge near-term exposure. - COGS scales linearly with equipment volumes, though factory overhead provides some operating leverage during volume upswings. ### Operating Expenses - **R&D:** Typically 2.5% to 3.0% of revenue, focused on low-GWP (global warming potential) refrigerants, heat pump technology, and digital IoT solutions. - **SG&A:** Typically 13% to 15% of revenue. Includes sales commissions, marketing, and corporate overhead. The Viessmann integration is expected to yield significant SG&A synergies. - **Depreciation & Amortisation:** Approximately 2% to 3% of revenue, heavily skewed toward amortisation of acquired intangibles following the Viessmann deal. - **Stock-Based Compensation:** Less than 1% of revenue, standard for industrial peers. - **Restructuring / one-time charges:** High frequency in 2024 due to the portfolio transformation, expected to normalise by 2026. ### Margin Profile - Gross margin: 26.0% to 27.5%. - Adjusted EBITDA margin: 16.0% to 18.0%. - Adjusted operating margin: 14.5% to 16.5% (management targets >50 bps of annual expansion). - Margin trend is expanding due to the divestiture of lower-margin Fire & Security businesses, the addition of Viessmann, and a mix shift toward high-margin aftermarket services. ## Balance Sheet Structure - Total assets are approximately $35 billion to $40 billion, heavily transformed by 2024 M&A activity. - Goodwill and intangible assets represent over 50% of total assets, driven by the legacy United Technologies spin-off and the $14.2 billion Viessmann acquisition. - Working capital profile: - Days Sales Outstanding (DSO): 50 to 60 days. - Days Inventory Outstanding (DIO): 65 to 75 days. - Days Payable Outstanding (DPO): 75 to 85 days. - Net working capital as a % of revenue is typically low single digits (positive). The company focuses heavily on inventory reduction to drive cash flow. - PP&E consists of global manufacturing facilities and distribution centres. Useful lives are typically 10 to 40 years for buildings and 3 to 15 years for machinery. - Right-of-use assets are material but manageable, representing leased warehouse and office space. ## Capital Expenditure & Investment - Capex as a % of revenue runs consistently between 1.5% and 2.0%. - The split is approximately 60% maintenance and 40% growth, with growth capex directed toward factory automation and new heat pump production lines in Europe and North America. - Capitalised software is a minor component, related mostly to internal ERP systems and digital customer platforms. - M&A pattern: Carrier executed a transformational acquisition in 2024 (Viessmann) and is now expected to return to a bolt-on acquisition strategy focused on technology and aftermarket service footprint. ## Debt & Capital Structure - Total debt sits at approximately $12.3 billion as of late 2024, reduced from $14.3 billion using divestiture proceeds. - Target Net Debt / Adjusted EBITDA ratio is approximately 2.0x. - Credit rating is investment grade (BBB/Baa2). - Key debt instruments include senior unsecured notes and a revolving credit facility. - Interest rate profile is predominantly fixed-rate bonds, with a weighted average cost of debt around 4.0% to 4.5%. - Share repurchase programme is highly active. Carrier utilised divestiture proceeds to fund a $4.7 billion share repurchase authorisation, executing accelerated share repurchases in late 2024 and 2025. - Dividend policy targets a payout ratio of approximately 30% of free cash flow, with a yield typically around 1.0% to 1.5%. ## Cash Flow Characteristics - Operating cash flow conversion is excellent, typically exceeding 1.0x Net Income. - Free cash flow margin (FCF / Revenue) targets 10% to 12%. - Major non-cash items include significant depreciation and amortisation (especially acquired intangibles) and deferred taxes. - Working capital is a slight use of cash during growth periods, but management's "Carrier Excellence" programme actively targets inventory reduction to free up cash. - Capex intensity is very low, allowing for massive cash return to shareholders. - Cash tax rate is typically lower than the GAAP effective tax rate due to accelerated depreciation and R&D tax credits. ## Sheet Structure 1. **Summary_Dashboard:** High-level outputs, target price, implied valuation, and key charts (revenue mix, margin expansion, FCF conversion). 2. **Assumptions:** All hardcoded drivers, macroeconomic inputs, segment growth rates, margin targets, and capital allocation rules. 3. **Revenue_Build:** Detailed build for the four new 2025 segments (Americas, Europe, APMEA, Transportation), split by equipment vs aftermarket where possible. 4. **Income_Statement:** Consolidated P&L from Revenue down to Net Income and EPS. Must include a clear line for Discontinued Operations to handle historical 2023/2024 data. 5. **Working_Capital:** Schedules for Accounts Receivable, Inventory, Accounts Payable, and Deferred Revenue based on days outstanding metrics. 6. **Depreciation_Amortisation:** Waterfall schedules for existing PP&E, new capex, and the massive intangible amortisation from the Viessmann deal. 7. **Balance_Sheet:** Standard assets, liabilities, and equity. Must balance perfectly. 8. **Cash_Flow_Statement:** Indirect method starting from Net Income from Continuing Operations, adjusting for non-cash items and working capital changes. 9. **Debt_Schedule:** Tranches of senior notes, interest expense calculations, and mandatory repayments. 10. **Equity_Schedule:** Share count roll-forward capturing the massive $4.7 billion buyback programme and dividend payouts. 11. **DCF_Valuation:** Unlevered free cash flow build, WACC calculation, terminal value (Gordon Growth), and implied share price. 12. **ROIC_Analysis:** NOPAT and Invested Capital calculations to track the return profile post-portfolio transformation. ## Key Financial Relationships 1. Americas Revenue = Prior Year Americas Revenue x (1 + Americas Organic Growth Rate) 2. Europe Revenue = Prior Year Europe Revenue x (1 + Europe Organic Growth Rate) 3. Total Net Sales = Americas Revenue + Europe Revenue + APMEA Revenue + Transportation Revenue 4. Segment Operating Profit = Segment Revenue x Segment Adjusted Operating Margin 5. Consolidated Adjusted Operating Profit = Sum of Segment Operating Profits - Unallocated Corporate Expenses 6. COGS = Total Net Sales x (1 - Gross Margin %) 7. SG&A Expense = Total Net Sales x SG&A % of Sales 8. Accounts Receivable = (Total Net Sales / 365) x DSO 9. Inventory = (COGS / 365) x DIO 10. Accounts Payable = (COGS / 365) x DPO 11. Free Cash Flow = Cash from Operations - Capital Expenditures 12. Ending Basic Shares = Beginning Basic Shares - (Share Repurchase Spend / Average Share Price) 13. Interest Expense = Average Debt Balance x Weighted Average Interest Rate 14. Adjusted Net Income = Net Income from Continuing Operations + Amortisation of Acquired Intangibles + Restructuring Costs ## Cross-Sheet Dependencies - The **Assumptions** sheet feeds all growth rates and margin targets into the **Revenue_Build** and **Income_Statement**. - The **Revenue_Build** feeds the top line of the **Income_Statement** and drives the activity levels in the **Working_Capital** sheet. - The **Working_Capital** sheet calculates changes in NWC, which flow directly into the **Cash_Flow_Statement**. - The **Cash_Flow_Statement** determines the cash available for debt paydown or share repurchases, feeding the **Debt_Schedule** and **Equity_Schedule**. - The **Debt_Schedule** calculates interest expense, which creates a circular reference by feeding back into the **Income_Statement** (reducing net income and therefore operating cash flow). - The **Equity_Schedule** calculates the ending share count, which feeds back to the **Income_Statement** to calculate EPS. ## Sign Convention - Revenue, assets, and equity are positive. - Expenses (COGS, SG&A, Interest, Taxes) are positive in their specific build schedules but must be subtracted in the Income Statement totals. - In the Cash Flow Statement, cash inflows (e.g., Net Income, Depreciation, increase in Accounts Payable) are positive. Cash outflows (e.g., Capex, increase in Inventory, dividends paid) are negative. - Debt balances are positive; debt repayments are negative in the Cash Flow Statement. ## Things Most Likely to Go Wrong - The company changed its segment reporting in Q1 2025; historical segment data from the 2023 and 2024 10-K (HVAC, Refrigeration, Fire & Security) is not comparable to the new structure. The model must use the recast 2025 segments. - Discontinued operations create massive noise in the 2024 historicals. The model must isolate Continuing Operations to forecast future cash flows accurately. - The Viessmann acquisition closed in January 2024, meaning 2023 historicals do not include it. Year-over-year growth rates for 2024 are heavily distorted by this M&A impact. - Amortisation of acquired intangibles is massive post-Viessmann. Excluding this from "adjusted" earnings is critical to understanding the true cash generation of the business. - Foreign currency translation is now a major factor, as Europe represents a significantly larger portion of total revenue post-Viessmann. - The massive share repurchase programme ($4.7 billion authorisation) will drastically reduce the share count; failing to model this will severely understate future EPS. - Restructuring costs related to the portfolio transformation will drag on GAAP earnings in the near term but should be added back for valuation purposes. - Working capital seasonality can cause cash flow to look weak in Q1 and Q2 before reversing in Q4. ## Validation Checks - Consolidated organic revenue growth should align with management's medium-term framework of 6.0% to 8.0%. - Adjusted operating margin should expand by at least 50 basis points annually. - Free Cash Flow conversion (FCF / Adjusted Net Income) should remain near 100%. - Capex as a % of revenue must stay within the historical 1.5% to 2.0% band. - The Balance Sheet must balance: Total Assets = Total Liabilities + Equity in every forecasted period. - Debt to Adjusted EBITDA should trend toward the company's 2.0x target. - The effective tax rate should remain in the 18.0% to 20.0% range based on the company's global footprint. - Dividend payout ratio should hover around 30% of free cash flow. ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Total Net Sales Base (2024) | 22,486 | $ Millions | Actual 2024 reported revenue | | Americas Organic Growth | 7.0 | % | Blended growth of commercial strength and residential recovery | | Europe Organic Growth | 6.0 | % | Driven by heat pump adoption and Viessmann synergies | | APMEA Organic Growth | 5.0 | % | Steady growth in emerging markets | | Transportation Organic Growth | 3.0 | % | Cyclical recovery in cold chain logistics | | Gross Margin | 27.0 | % | Reflects recent pricing power and Viessmann mix | | SG&A as % of Sales | 14.0 | % | Target level post-synergy realisation | | R&D as % of Sales | 2.5 | % | Required investment for low-GWP and digital solutions | | Adjusted Operating Margin | 16.0 | % | Base year margin, expanding 50 bps annually | | Days Sales Outstanding (DSO) | 55 | Days | Historical average | | Days Inventory Outstanding (DIO) | 70 | Days | Historical average, adjusting for Carrier Excellence initiatives | | Days Payable Outstanding (DPO) | 80 | Days | Historical average | | Capex as % of Revenue | 1.8 | % | Aligns with asset-light manufacturing model | | Effective Tax Rate | 19.0 | % | Management guidance for adjusted effective tax rate | | Average Interest Rate | 4.5 | % | Weighted average cost of existing fixed-rate debt | | Share Repurchase Spend (Year 1) | 2,000 | $ Millions | Execution of the $4.7B authorisation | | Dividend Payout Ratio | 30.0 | % | Stated management capital allocation policy | | WACC | 8.5 | % | Standard discount rate for large-cap industrial | | Terminal Growth Rate | 2.5 | % | Long-term GDP growth plus energy transition tailwinds | ## Data Sources & Benchmarks - **Filings:** SEC EDGAR for Carrier Global Corporation (CARR) 10-K, 10-Q, and 8-K filings. - **Presentations:** Carrier 2025 Investor Day Presentation (May 2025) and Q4 2024 Earnings Release. - **Peers for Benchmarking:** Trane Technologies (TT), Johnson Controls (JCI), Lennox International (LII). - **Industry Data:** AHRI (Air-Conditioning, Heating, and Refrigeration Institute) for North American shipment data; EHPA (European Heat Pump Association) for European adoption rates. - **Consensus Estimates:** FactSet or Bloomberg for near-term revenue and EPS consensus to validate model outputs. ## Sources - Carrier Global Corporation Investor Relations: https://ir.carrier.com/ - Carrier Q4 2024 Earnings Release: https://www.carrier.com/commercial/en/us/news/news-article/carrier_reports_strong_2024_results_and_announces_2025_outlook.html - Carrier 2025 Investor Day Presentation: https://ir.carrier.com/events-presentations - SEC Form 8-K (July 2025 Segment Recast): https://www.sec.gov/edgar/browse/?CIK=1783180 - Viessmann Acquisition Press Release: https://www.carrier.com/commercial/en/us/news/news-article/carrier_completes_acquisition_of_viessmann_climate_solutions.html --- ## Frequently asked questions ### What does Carrier Global Corporation do after its portfolio transformation? Carrier Global Corporation is now a pure-play provider of intelligent climate and energy solutions, focusing on heating, ventilation, air conditioning (HVAC), and transport refrigeration. This transformation, completed in late 2024, involved divesting its Fire & Security and Commercial Refrigeration businesses and acquiring Viessmann Climate Solutions. The company emphasizes sustainable climate technologies and an asset-light manufacturing model. ### How does Carrier Global generate revenue and what are its key business segments? Carrier Global generates revenue through its climate and energy solutions, including HVAC and transport refrigeration products and services, with a strong focus on high-margin, recurring aftermarket services and digitally enabled lifecycle solutions. Its primary business segments are Climate Solutions Americas, Climate Solutions Europe, Climate Solutions Asia Pacific Middle East & Africa, and Climate Solutions Transportation. ### What are the primary capital expenditure assumptions for Carrier Global in the financial model? The financial model assumes Carrier Global's capital expenditure as a percentage of revenue runs consistently between 1.5% and 2.0%. This capex is split approximately 60% for maintenance and 40% for growth, with growth investments targeting factory automation and new heat pump production lines. ### What are some key profitability assumptions used in the Carrier Global financial model? Key profitability assumptions in the Carrier Global financial model include Cost of Goods Sold (COGS) as approximately 75.14% of revenue and Selling, General, and Administrative (SGA) expenses as approximately 14.26% of revenue. Research and Development (RD) is assumed to be about 2.40% of revenue. ### What is the main purpose of the Carrier Global financial model and its forecast timeline? The Carrier Global financial model serves as a comprehensive equity valuation and scenario planning tool for equity research analysts. It is designed to assess the company following its significant 2024 portfolio transformation and has a forecast horizon from FY2026 through FY2030. ### Is there a downloadable financial model available for Carrier Global, and what is its primary use? Yes, a downloadable Excel financial model is available for Carrier Global. Its primary use is to provide a detailed framework for equity research analysts to perform equity valuation and scenario planning for the company. [Interactive forecast calculator](https://finamodel.com/companies/carrier-global/forecast)