On Thursday, CFRA, a reputable financial research firm, adjusted its outlook on shares of Carrier Global (NYSE:CARR), raising the price target from $61.00 to $65.00 while maintaining a Hold rating on the stock. The firm's analyst cited expectations for margin expansion in 2025 as the rationale behind the increased target price.
The new 12-month target price reflects a 20 times multiple of the projected earnings per share (EPS) for the year 2025. This valuation multiple is slightly higher than Carrier Global's historical forward average.
The anticipated margin growth is believed to stem from the company's strategic refocusing efforts, which include divesting non-core businesses to concentrate on its core heating, ventilation, and air conditioning (HVAC) operations.
The analyst has revised the earnings estimates, reducing the 2024 EPS forecast by $0.06 to $2.88, while increasing the 2025 projection by $0.04 to $3.26. The second quarter EPS of $0.87 surpassed the consensus estimate by $0.02. The firm's performance was bolstered by significant data center orders in all regions during the quarter, contributing to a more than 20% rise in total commercial HVAC orders.
Carrier Global's strategic shift towards becoming a pure-play HVAC entity is expected to align the company with the growing trend of electrification and the accompanying demand for data centers.
The planned divestitures are projected to generate approximately $7 billion in proceeds. These funds are anticipated to be utilized for further debt reduction and share repurchases, as part of the company's capital allocation strategy.
The stock currently offers a dividend yield of 1.2%, providing an additional return to shareholders. The financial analyst's update reflects a cautiously optimistic view on Carrier Global's future financial performance and strategic initiatives.
In other recent news, Carrier Global has been making significant strides in its ongoing transformation. The company has recently finalized two major divestitures, selling its Industrial Fire business to Sentinel Capital Partners for $1.425 billion and its security business, Global Access Solutions, to Honeywell (NASDAQ:HON) for $4.95 billion. These sales are part of Carrier's strategy to streamline its operations.
In terms of financial performance, Carrier reported a robust first quarter in 2024. The company saw a 17% increase in sales to $6.2 billion and a 44% rise in adjusted operating profit to $927 million. Additionally, Carrier's earnings per share grew by 19%, demonstrating its continued momentum.
Several analyst firms have recently adjusted their outlooks for Carrier Global. Baird upgraded the company's stock from Neutral to Outperform, raising the price target to $75. Similarly, Citi upgraded Carrier's stock from Neutral to Buy, setting a new price target of $74.00. On the other hand, Mizuho Securities maintains a neutral stance, but raised the price target for Carrier Global shares to $65.
These upgrades reflect analysts' confidence in Carrier's strategic transformation and future growth potential. The analysts expect Carrier to continue streamlining operations and focusing on core businesses, which could accelerate its growth and enhance shareholder value. These are the recent developments in Carrier Global's ongoing transformation.
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