Key Takeaways:
Carrier Global reported Q2 adjusted EPS of $0.86, down 7% from a year earlier, as operating margin contracted 1.8 percentage points.
"With strong orders, record backlog levels, and first half results being better than expected, we are raising our full year guidance on sales, operating profit, and EPS," Chairman and Chief Executive Officer David Gitlin said.
Revenue came in at $6.4 billion, up 3.9% from a year earlier and above Wall Street estimates. Adjusted operating profit reached $1.1 billion, with an adjusted operating margin of 17.2%. But gross margin of 27.2% trailed the consensus estimate of 28.1%, and overall operating margin fell to 13% from 14.8% a year ago. Free cash flow totaled $810 million in the quarter.
Orders rose about 40% from a year earlier, led by 65% growth in commercial HVAC and a fourfold increase in data center orders. Backlog surpassed $8 billion, up about 40% year over year.
Carrier raised its 2026 outlook, now targeting roughly $23 billion in sales, $3.5 billion in adjusted operating profit and $2.90 in adjusted EPS. Data center revenue is expected to reach about $2 billion, up from a prior forecast of $1.5 billion. Despite the guidance raise, shares fell more than 8% on Tuesday, closing at $66.19, as investors focused on the margin compression and an investigation announced by SueWallSt into potential securities law violations.
The company's residential business showed signs of recovery, with Climate Solutions Americas residential sales up 9% in the second quarter and light commercial sales rising 10%. In Europe, residential sales increased by high single digits, with heat pump sales up about 20%. Carrier also completed the acquisition of 75F, a provider of building management system technology, expanding its addressable market by about $20 billion.
The earnings miss on profitability raises questions about cost management even as demand accelerates. Investors will watch for updates on the securities investigation and Carrier's Q3 results, with the company forecasting revenue just below $6 billion and adjusted EPS of about $0.75.
This article is for informational purposes only and does not constitute investment advice.
