Carrier Global currently trades at $56.48 per share and has shown little upside over the past six months, posting a small loss of 4.1%.

Is there a buying opportunity in Carrier Global, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Do We Think Carrier Global Will Underperform?

We don't have much confidence in Carrier Global. Here are three reasons there are better opportunities than CARR and a stock we'd rather own.

1. Slow Organic Growth Suggests Waning Demand In Core Business

In addition to reported revenue, organic revenue is a useful data point for analyzing HVAC and Water Systems companies. This metric gives visibility into Carrier Global’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Carrier Global’s organic revenue averaged 1.1% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations.

2. EPS Took a Dip Over the Last Two Years

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

Sadly for Carrier Global, its EPS declined by 2.8% annually over the last two years while its revenue grew by 7.1%. This tells us the company became less profitable on a per-share basis as it expanded.

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Carrier Global’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

Carrier Global falls short of our quality standards. That said, the stock currently trades at 20.3× forward P/E (or $56.48 per share). This valuation tells us a lot of optimism is priced in - we think other companies feature superior fundamentals at the moment. Let us point you toward a dominant Aerospace business that has perfected its M&A strategy.

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