Melius initiates coverage on Carrier Global stock with Hold rating

Melius Research initiated coverage on Carrier Global (CARR) with a Hold rating and a $90 price target, acknowledging the company's significant transformation into a more attractive HVAC pure play since its United Technologies spin-off. This strategic evolution, marked by key divestitures and the Viessmann acquisition, has driven 16.7% LTM revenue growth and consistent dividend increases. The initiation follows Carrier's strong Q1 2025 earnings beat, raised full-year guidance, and recent strategic investments like the $1 billion U.S. expansion and Addvolt acquisition, collectively reinforcing its market position and growth trajectory, even as it trades above its InvestingPro Fair Value.

Analysis

Carrier Global's strategic transformation since its 2019 spin-off has culminated in a more focused and attractive HVAC pure-play, a thesis validated by Melius Research's recent coverage initiation. The company's portfolio has been significantly reshaped through the divestiture of non-core fire, security, and refrigeration assets and the pivotal early 2024 acquisition of Viessmann, strengthening its position in the European heat pump market. This strategic repositioning is yielding tangible results, evidenced by a 16.7% last-twelve-months revenue growth and five consecutive years of dividend increases. The positive operational momentum is further confirmed by a strong first-quarter 2025 performance, where adjusted EPS of $0.65 beat estimates of $0.58, and the company raised its full-year EPS guidance to a range of $3.00-$3.10. While Melius initiated with a Hold rating and a $90 price target, acknowledging a valuation that is currently above its InvestingPro Fair Value, other analysts like RBC Capital have raised targets to $87 on an Outperform rating. Carrier's forward-looking investments, including a $1 billion U.S. expansion and the acquisition of electrification specialist Addvolt, underscore its commitment to growth and innovation in sustainable technologies.

Key Decisions for Investors

• Investors should recognize Carrier's successful transformation into a focused HVAC leader with a strong growth profile, supported by recent earnings outperformance, raised guidance, and strategic acquisitions in high-demand sectors like heat pumps and electrification.
• Despite the strong operational narrative, the 'Hold' initiation from Melius and the stock trading above its 'InvestingPro Fair Value' suggest that much of the positive news may already be priced in, warranting caution regarding near-term upside potential.
• Key factors to monitor include the successful integration of the Viessmann acquisition to realize projected synergies and continued margin improvement towards the higher-end peer levels mentioned by analysts, as these will be critical for justifying the current valuation.