CARR - Earnings call transcript Q4 2021 | Carrier Global Corporation

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Nigel Coe

Good morning. Thanks for joining us. My name is Nigel Coe from Wolfe Research, and I welcome you to our 14th Global Transports and Industrials Conference. It's my pleasure to welcome Carrier Corporation to the conference. And I'd like to be hosting CFO, Patrick Goris. to lined] the Head up Sam as Rockwell to it's of said Pearlstein [field have to well. almost them, way, by incredible IR, I Rockwell; and

got joining we interactive so dive forum. is do into as this for want get soon will you as But thank amount to gentlemen, morning. So an We've possible. a it to fair through this us I highlight

please talking feel box, you it, free type If the got questions the start from those any and there's audience, I'll queue. through questions if into the to in

that So into you opening Q&A. off Patrick, comments? with to any said, if I don't with get want know, Otherwise, just we'll start

Patrick Goris

we No. go Q&A. straight Good to be to Nigel, and can here,

Nigel Coe

Okay. Great.

from many I surprised, Carrier, And talk moving So go to it's a surprised. I were about think was challenge? fair you to moved what I was Rockwell can think say to new curious you from I'm if when attraction maybe there. we'd the Carrier, then that

Patrick Goris

Sure.

So for been like And plot Rockwell complexity course. probably about years join of great is It's and you a player XX leaving not day plotting a I easy. a big there that in my this size XX that can company, you is part role, its Carrier of and that in know. company every all has can years company company. is a course. conglomerate It's as a never to special own be a after

reduction frankly, whether commercial was and of to of view, from it deployment includes point I'm things whether It's Rockwell the that at portfolio true. wouldn't amount absolutely opportunity. be of it a have point opportunity internal from We an joined. here that of tremendous view. whether I a is from probably going A whole of opportunity. told view, complexity doing do capital And is that I I before amount it’s tremendous point

but work, our of for Lots excited be opportunity for very So in a to share tremendous owners here. of short, all and amount employees.

Nigel Coe

bad too There's be as Florida headquartered doesn't well. place to either. a is -- not Florida

That's through the so towards second But time we So portfolio. talk quarter. of rolling get had transportation, a about markets, just what on too. state strong up maybe seeing seeing results, and than end Last up far? very XX%, the I we’ll with more us reported the the you definitely you're second of end talk union through mid-teens the quarter just ball my wonder here. through Maybe you're X to what residential, topics commercial

Patrick Goris

Yes.

call, was of all quarter year In about organic we quarter. we quarter not except QX our probably saw that growth raised for quarter, segments, pretty bit I -- XX%, by & XX-plus has our the momentum first second growth, If our same we -- in especially expect segments continued to in We across resi outlook less be That the during within was third was look it all second the at in than Fire a within little full continued strong our March So Security. little HVAC, strongly, rate a that. QX. the better growth the percent. strong. than or our exited segments,

rebound segment. the bigger in We Light probably within expect be down. expect will, quarter, be we And HVAC been to this still it commercial but that think, has less to commercial. I change light our

areas and driven was commercial well of last. as expect QX. growth improvement. to mid-teens sequential to about world expect a segment. throughout we We rebound, see quarter by the for growth in that the It we you primarily that strong Commercial HVAC, in opportunity in China We mentioned, higher it organic HVAC, expect another other

quarter. be be truck And will So North by do in the helped trailer in believe and the we in the growth America Refrigeration, this momentum there. that will that, rates. Within a segment strong quarter fastest pickup

the America end I mentioned, than the quarter, first I less North at truck and up think XX%. As of a trailer little was

QX up And help quarter. performance comps in in than that our good much trend. QX, in significantly segment in to Fire easy again, segment has that will there, in turn margin stronger expect and should in which a QX, strong really an conversion obviously, We Chubb, that second Security on expect March & pick particularly we improving but been was expect we be area. there.

full year, to the last that's be growth all second by and the the had very about year, driven strong compared the resi we half For really prior we still flattish expect to year.

saying Nigel, the segments expect momentum continued our broad-based by in QX. growth quarter, So I'd we across has second into summarize, the and

Nigel Coe

pretty it, comfortable you April, a versus planned lot has of what, as So end there. not whole changed much you’re

Patrick Goris

. much Pretty

Nigel Coe

How Residential on are perspective your is the in inventories Is mid-XXs that What's sell-through sales obviously now? here. I channel? sell-in and starting you the And remember. I channel, right into roughly to inventory big equalize versus if XQ, swing think your mentioned XX%, XX%, factor the sell-out levels? in the normalize

Patrick Goris

Yes.

we comments QX Having a continue and in position the new good year-over-year. of availability performance to construction is may XX% was QX, product as inventory seasonal channel. the on couple here. there conversions strong we One, well helping seen and dealer a We inventory this maybe we've as earlier-than-expected that about up said certainly see have call, In So in believe us we some in build done. the resi.

vary we've you strong pretty much what XX% till April may we a It 'XX support drive field will end think that XX%, QX It's still would look in quarter, the that's aligned up in that movement seems was the that. inventories QX about but in I at balances say in the XX was confidence, market expect inventory We versus gives least for in but certainly that to early movement at from up And bit, now, to XX, that movement the done versus us now it perspective. a market. very with a April the those month range what being of be about higher has from at to percentage XXXX. if And XXXX. seen

Nigel Coe

And you We level X this the same factor. mentioned X players into supply availability there's issue the market. as know product obviously that is comes or chain in been And whole a of haven't the key had well. availability

So supply maybe market related some whether just of some some talk pressures supply your chains you're and to with seeing about share competitors? movements chain

Patrick Goris

Yes.

us they're perspective supply we rebound. a levels clearly we prepared a from a deliberately but as at of chain than look I our increased So efficiency end part the at tighter of it’s surprise, electric this year. it's helped components of us generally well. have an inventory point includes shortages currently, to as the the It's of early seems for from If not Actually, impacting usual. some components where that maybe and are, view. And in certainly, XXXX, that

of the from factory incurring But the guide example, view, And of so, April meet just our customer of production continue think shorter us a for and year. the impacts point at logistics some including end higher of costs in embedded we're and those demand. for are charges, doing efficiency it So runs. day, we to freight incremental

Nigel Coe

Yes.

Thanks, Okay. Patrick.

Patrick Goris

challenges -- call our supply teams they're out while the I chain in meeting they've just addressing And doing because demand. business tremendous work would and

Nigel Coe

right input cost can I gave inflation quite and now. specific stressful price it's And in you imagine on April. Yes. very guidance

about you've to much the in going of market whether million by of pressures. what inflationary that's just incremental price $XX Maybe price done think with plan? terms increases the tracking to I additional your and talk out

Patrick Goris

Yes.

And to rather monthly a see what's prices. So daily input we're weekly our or throughout with are a actually a about and we activity -- this. and proactively than this costs businesses, trying is, proactive frankly, happening increasing be

additional so looking HVAC at frankly, Fire announced our Refrigeration I the that year in fiscal year Security not surprised price but increases throughout next to environment, would implemented is there in and And increases we've price the for as implemented well. for also already in & protect year. would be segment, our current this that segment. us additional And be

Nigel Coe

different back a more are to in said you to inflation justify…? what mean, I you Is versus then, April? seeing bit cost that

Patrick Goris

where that is it's materially nothing either -- except through day, activity. that the pricing. it cost up has day-to-day looking need address And would I comes changed, you or What every something at news say a to

Nigel Coe

to independent be working few about talk maybe more this really before more seems with here. well versus of company UTX The point. Watsco. company mean, relationship as a Maybe then just relationship I Carrier longer-term it Watsco, we Watsco? move at a changed the with strategic as for feels in on working better your to some issues And Okay. you're like Carrier what's

Patrick Goris

CEO companies. and discussions would drive had see had the companies to to benefits product we I today thing we what expect there's ground. So Watsco many And from that think, better a some that team do than companies the product but And I benefits where we leadership I'm the that. better also of I say what how think X as both and that we have frank can an availability -- to Dave, and is to And between been relationship do we for changed, think on that better our has do that can open before. I relationship Watsco with we what both have the be on how capabilities, can have overall that clear I both have better better. Watsco feet And a

seen And I there. is much think has to it companies. I think more be benefited there both

Nigel Coe

Okay. maybe more on one then of the sort And Great. framework. -- the guidance on point

given kind out to from we on XQ specifically? And talked in price we of think specifically, that's buyer the inflation track step-up think anything take balance XQ year and margins the to of got, not You do or lost about margins incremental a the about -- turn if income. And higher the the pressures we to we've that? Are probably in perhaps XQ I XQ, still XQ. big with about greater improving XX% might XQ seen about how that

Patrick Goris

Yes.

it's for I continues April for core, incrementals On first maybe a be to there. the say, closer should FX, full the core X XX%. XX% to to XXXX. year we income. basis, buyer say, our close XX% the the year That's guide. per of exclude full I guide, we're reported target One year, operational as the going April then, to main course, and that's is full And really items So

quarter from that's and it For referring you the we a to of price/cost most view. be think what difficult were for expect that point QX, is will I QX,

And so where to of is more those probably expect year. continuing some the quarter inflation effect neutral to by but we gap, year, for we've target and QX the for at additional same full take versus price time, when full a hits, the the be the announced time have increases the

Nigel Coe

see, what way. That's Great. the I by to Right. expect

Moving on you and your huge topic for to Healthy interest of stimulus, Buildings, IAQ competitors. and

of got you called million of kind we're $XX which still with you make is the think the healthy I of kind how $XX And in news and IAQ, out The opportunities, you million tracking progress building $XXX million? that is to seeing vaccines a Buildings? building order that pipeline starting pipeline a in versus rate et XQ. Are cetera. of pandemic, Healthy of good strong

Patrick Goris

Yes.

to, them trend pipeline accurate. are as I So the years would We many sustainability that big secular well. grow. the only to refer us to whole come, play a Buildings obviously, you believe shared benefit is And not call. but continues that the a This that we will for numbers on Healthy is say

focused a we Healthy Building to have leader. sustainability, the last the call, us dedicated this this And team in as also us. with a new months, opportunities on few and is now so opportunity under we seasoned for And on mentioned huge

this And Abound, opportunity to this opportunity, so Abound this differentiate capabilities whether And another look opportunity. if opportunity. focus launched, just after on more is an us go for the it's, and some for you have of important means example, at it we multiyear us

Nigel Coe

you Yes. And mistaken. think April, in I'm if launched I not Abound

Patrick Goris

to We're them it's investment still And it's as That's Launch have differentiate excited. correct. this I dollars, we course. it's the there. an of opportunity, is see an opportunity we we area sustainability, early areas whether investments the It's expand our very some where talk it's where one about clearly long-term customer it's putting capabilities, -- days. whether working with to down mentioned, is because healthy, as we're of and

Nigel Coe

Yes.

but for now. Okay, We're big stimulus. announced, there the it coming package, stimulus the was, great. with seeing last a not numbers, And that pretty -- name some in now? was big on But is education, momentum the was you for seeing package whatever then drop for competitors. strong a the those big markets, proposed money season right and We're which big Are your end vertical we entering of upgrades. a education seasonally education markets any

Patrick Goris

we've what people seen K-XX that clearly is hear say, activity. is we that Yes. Nigel, What from I our an would uptick in

our opportunity is segment, is not Security something an but would say just our And so this & certainly that also only that for seen. I for we've HVAC also segment. Fire

IAQ, So about it's about not safety. also just sustainability and but

think so think about evacuation. alarms, about access, And

segment And so that's play. where more comes than X into

yes, Again, an there lot multiple big an money, a a so think focus there's mentioned. this. us on opportunity, positioned that And be mentioned is sums We opportunity it. And we of for for we're years. will very believe of lot you being for well K-XX

there. and kit where targeted webinars from school provide have districts invest help because districts is districts outreach. obtain how not to find an dedicated school the get also of the play the then the We offerings, to team. funds the We them And may and we say important I direct then how to sales school take best also to some doing funds, the it role would to know that that funds often to to

see what we districts there so exactly we're to that's help an school doing. And and opportunity

Nigel Coe

think But a more this This Right. XXXX early of it's think? too you year. for beyond you probably do is tailwind, and

Patrick Goris

-- activity. if we're you clearly think first Well, all, seeing in of uptick an K-XX about

that's and as you commercial and primarily well in Fire North and these, of Security. America know our applied Some & exposure in light

that Some of lead are than that times have book just and bill. some longer

Maybe. see fiscal next so several over But a expect of should later the year? years, to some this And be would I that benefit. that certainly,

Nigel Coe

Yes.

see more… went there. I out I'll Okay. get try lights and the

Patrick Goris

It to was not your related question.

Nigel Coe

see there. -- questions some can if ask ask more in I'll Maybe, before I’ll get yes, clearly. I

Security any And the access, I'm was & there for mentioned in wondering contactless a social just Security. post-COVID. a there? this sets distancing than set the there's You of good pre-COVID if thoughts office. We've et talk kind what's Fire about & & is opportunity Security better changing opportunity and opportunity We've cetera. kind to Fire in got Fire of post-COVID got

Patrick Goris

within it, Where our sensors we that see Security. a, sell call some or of some synergies we convergence a related to & Fire

to example, for there of other so within And detectors, segment. we that what types to link have opportunity within an smoke And that do detectors we HVAC. is

to could think And to so that HVAC no do is quality there room. of do reason about and these in And in presence it or measure for on be air the depending some not sensors why create system loop. as you presence room, sensors what that the a tell

opportunity I segment, a our that the of of bit I & so actually has questionable And the of course. synergies drive some say say a I'd segment, may parts say that would to clearly, our within whole Fire part little COVID Fire & between the less clear. or before Security highlighted should And Security that's segments been have more

Nigel Coe

can't heard sort spin. stories. this strategic little there's There's them from bit quite Okay. of the you that angle. parts UTX been Yes. to CEO, a publicly other Chubb. Chubb want headlines there. of I know Greg comment before Hayes I the as different very course, been question And talking about well. not And some be some press might comment there's We on but a

focused strategic businesses, the not more going might you're field that on strategy kind the of whole be Chubb HVAC to operations forward? Given Carrier kind within of and service of improving the

Patrick Goris

at business. at a every that at focused only synergies be where same as every That's our Yes. company of like of That our is a we the performance our taking bigger we and where portfolio of we're we're at on where, the that portfolio on with operating that And also taking strategic, in rest company our parts at focused this XXX%. maybe look. the that's performance the that's owner. have JVs, look look may that improving less the there. Chubb is company. -- Chubb, question of as best but overall improving company. you are simplifying a are it's the part We're point the we what part we much frankly, that just the at the But portfolio assessing And is parts operating of includes the of not are We're a asked view we're comes not time, less our our dispassionate own looking and entire of includes why

Nigel Coe

Right.

JVs. I the but you JVs And have, of mentioned know You many XX it's how still. I north forget

Patrick Goris

on are the the our to get year. XXs way this end to we by Actually, low of

Sam Pearlstein

Those the... are of

Patrick Goris

Yes. for JVs. minority you Thank the Of that. clarifying Yes.

Nigel Coe

Is be and this could are flow balance these… something that reasonably to material sheet? cash Or

Patrick Goris

I this on material equity pruning do further, have out have year. would a not what's Yes. impact We that divestiture for dozen there, it, believe, in call last the either like or income don't another cash buyers proceeds. the pipeline Nigel, year

Nigel Coe

Obviously, valuable at JV structures more At that very JVs, this point, there's nothing do minority like It some the on have point. those You focus China. on well. large it you seems WESCO as do sounds positions? in smaller Toshiba the this to

Patrick Goris

probably with without But are them first is that's harder course, a to us not be And bad thing. JVs of that mentioned. are presence larger of they the parts smaller ones, that world looking of would for them. the being help ones that think in think ones I significantly of thing. bad Minority rather us you a do Actually, than a we at, as fair not statement. all, JV the just the

Nigel Coe

Right.

so gears where far, Okay. talk several improving maybe that over see you XXXs. how -- years? what And talk just about, about to maybe just to margins program. what's within that next Carrier we've Shifting Patrick, the achieve achieved And

Patrick Goris

Yes.

$XXX X-year year, target program factory million program costs, million. full course, supply out last We million. our the in of as resources this then, So started and to to XXXX costs, year drive delivered And Last think utilization for $XXX field G&A of of it's targeting full year. $XXX year, include XXX, chain Carrier we're the a that we well. increased costs

inflationary to become million, $XXX other to inflation focus. the given always that's there ways our as get headwinds, headwinds. additional X-year million. very then headwinds, look we And but the well additional at pricing of Of And course, more looking it's get we're $XXX we for course, mentioned, if much target offset as out. challenging to to are cost The remains

is target. of of year, so absolutely And that XXX. it another for And Carrier $XXX means that million means the next savings

Nigel Coe

Okay.

pulled from So the spending $XXX some million, investment forward XXXX XXXX. into you

you million in spending this factor I think at of How much at should the for this $XXX now we're do next we investment think year year. point? spending investment for

Patrick Goris

$XX point, we're dialing about in At million. this

of that's X $XXX kind million about said was the in would XXXX, program another so over And million we $XXX year, we million, now this $XXX years next do, year. million $XX in

next consider this And to that are of what the another point, also do and And million more. year. development we But is or may to our we capabilities. returns returns think to enhancing $XX will the we're again, we the like, expenses thinking for which but But we tell also then I research invest million increasing $XX about investments if primarily selling and next digital at and of that with see you opportunities year. so continue like

Nigel Coe

invest Yes. grow, that's course, key you to And the of should thing.

company? et about think where Your that cetera. if reason Can at ex margins, about equity Security, your you Carrier portfolio XX.X% XXXX. operating & Do Fire I'm XX.X%, can't adjust you're OEM below margins, be there those -- at a cetera, about thinking et look mid-teens income, here income, why is if levels? Carrier your Carrier in is EBITDA HVAC margin is. best-in-class equity of to well any mix, we sort income, you be

Patrick Goris

we're several are is can we to growth say some And control I that. that The them. short organic of in I'll I is That's to across X like I we resources One, why And our that or accelerating our have think absolutely sales in part yes. see X levers would accelerating pricing of our organic investments mention, there use achieve answer drivers that the happen. in R&D that make of making portfolio. Frankly, growth.

tremendous attaching about you've of the streams, having services, across aftermarket. life flow and like third against of our our simplification that, more be Carrier is to business. cost XXX accretive. or it's cycle, firms. -- aftermarket the of bumping benefit A company, be whether not the across that regional recurring us up throughout including OEM tend is increasing cash amount focus we the opportunity lever just efficiencies margin are on it's driving heard to some smaller it talk frankly, here. Aftermarket sticky Second, tends the the big And those revenue digital competitors, the revenue entire company,

touched our that on Many simplify less do companies we journey significant opportunity mention we would basically have more but margin, For think you with Nigel, doing to done infrastructure. is ago, I services. example, we to that see just what have and portfolio. complex fourth a shared and XX I have or started and years make started A ourselves scalable respect that, element on implementing

and say, beyond margin portfolio, balance for profile, the course, as lower would I there and higher element, frankly, opportunities in see another at. And lot add are opportunities by And growth, a footprint. then of the of PPE, profile. a just but at on a something capital review absolutely margins, looking efficiency, cash less that well. probably we working improved subtract the I And sheet faster-growing we're goes taking ROIC look free close As growth profile, profile, reinvest we're can margin-accretive of businesses. flow we That's frankly,

margin over opportunities So the next business. of in but several I our answer, short, a see lengthy for in little a bit tremendous years expansion

Nigel Coe

for that brief Patrick, question. to that answer thanks

the applied You attachments from service talked the about is service attachment in and think increase ambitious target where Maybe XX,XXX. so service that XX,XXX talk It growth we about pretty initiative just like to and a are what to I rates? does XX,XXX, seems your target. that to rates,

Patrick Goris

Yes.

minority significant are in with market us. assets of that contract So first that we under it's out the our have all, a of still

frankly, year. investments. increase find first we're the value the target are that making as under really who are where the we and we the customers with contract, working a XX,XXX so assets to of assets assets step contracts And sell the area our out this assets assets -- That's more those And economics to then we some as of put People on. those ourselves it's there see path those contract. to or those under having another we're The where know attractive. XX,XXX

think you or within HVAC. compared be -- to to first about the margin more aftermarket tends If accretive sale the -- just the equipment

benefit being benefit And initial well. is revenue or life nature of there. a There the product, it And recurring a look of there's be so to over sales in about more total of as the you value cycle value. the the equipment Xx aftermarket tend if the the equipment,

again, And we margin so of there's drive drive you this to focus for is the another market, I enhancing And our years, say, is aftermarket what, absolutely aftermarket enhancing business seeing that that but already our is opportunity on the us will growing pay double-digits. long-term to should know over multiple say. way that growing now margin growth, off focus this we're is expansion, something part

Nigel Coe

Thanks, Great. here. running time Patrick. bit a We're on low Right.

on we to in organization How One, the What path maybe ones squeeze cash portfolio I about addition? focused the Chigo even the to cash lot over term? free quick or and here. X acquisitions? want a conversion then you there We've And just about done So on conversion. free XXX% talked -- do but Is medium a are portfolio acquisition. subtraction. better

Patrick Goris

Yes.

yes, to path cash question free over I flow. So The maybe your is, do XXX% towards time. first on a a cash flow see answer free conversion

headwinds dividends income is JV is X JVs free the The have cash I flow to JVs. from get our from our than -- think our that lower to our we well conversion. equity known one it's

flow. we is improving or But clearly one get within other non-cash I I that see opportunities have The cash pension a is to more benefiting us income even would capital. working to us. that's Chubb driver with XXX% say free Main that,

We opportunity throughout address are And therefore, increase conversion. our on way efficiencies I in tell capital very and a bullish have structured you, drive working capital to I'm looking there, and cash through now the flow to working free our segments.

Nigel Coe

And Great. acquisitions?

Patrick Goris

look post we have financial now a your better repurchase position I And of in it's second flexibility then were share was about being rating. credit a as organic a solid well, And dividend. inorganic capital within The it's and growing acquisitions, priorities, than more much really growth, spin, of all much part we it a then, if of context to question balanced the at investment-grade have the includes our deployment. course,

corp is our so building. acquisition changes. on there for in for And hired health solutions, leader, a actually Jen the new the new We whether focus sustainable being made dev pipeline some lot increasing chain strategic and cold aligned or our of And acquisitions, it's leader the lead, for priorities, Anderson. a on side, safe we've with

is And so is see the would more a And of of also now to maybe up elephants. deals. $XXX I think million to say there. And to financial expectation move bolt-on smarter big than than it range internally have focus we But maybe bolt-ons a to my of think performance, you'll there. that $X.X probably more think But billion. improve being that I our as acquisitions given all bigger the going opportunity

Nigel Coe

we're here. agree slightly overtime Well, I that. with Patrick, Yes.

thank we'll Sam, much. you So so draw discussion. Patrick, great you a your But time, there. much thank very line for

Sam Pearlstein

Thank you.

Patrick Goris

you. thank Nigel,

Patrick Goris	Chief Financial Officer
Sam Pearlstein	Vice President of Investor Relations
Nigel Coe	Wolfe Research

Carrier Global (CARR) 25 May 212021 Q4 Earnings call transcript