Carrier Global Downgraded: BofA Analyst Cautions About HVAC Concerns In Europe

BofA Securities analyst Andrew Obin downgraded Carrier Global Corporation CARR to Underperform from Neutral, lowering the price target to $55 from $62, as heating, ventilation, air conditioning, or HVAC concerns increase for Europe.

The analyst is remarkably downbeat about the increasingly negative data points on Europe's heat pump demand trends.

Countries are pushing or diluting green incentives and regulations, leading to a slowdown in the market. The analyst adds that this is particularly impactful for Carrier as Viessmann's revenue is approximately 40% heat pumps.

EuroConstruct expects overall construction in Europe to decline, which could likely impact Viessmann's boiler business, the analyst notes. 

In Germany, heat pump applications fell by 95% year over year in August. Italy saw a 34% decline in heat pump sales in the first half of 2023. In Poland, the heating association's forecast shifted from a unit sales growth of 45% year over year to a decline of 25%, Obin notes. 

All of these are potential headwinds for Viessmann (sales/rev breakdown: ~42% Germany, ~10% Italy, ~9% France, ~6% Poland), the analyst adds.

Carrier's valuation has been rerated upwards following the announcement of the Viessmann acquisition. 

U.S. light commercial HVAC is normalizing as it works through pent-up demand. 

At a recent investor conference, the company was bullish on near term light commercial trends, saying that "light commercial is trending far better than we thought" and suggested that light commercial was on track to end above +20% for the year, the analyst notes. 

However, Obin adds that light commercial, which is one of the most profitable product lines for the company, tends to lag residential and will be facing tough comps into '24.

Price Action: CARR shares are trading lower by 1.5% to $53.79 on the last check Thursday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.