In the introductory segment of Carrier's Fourth Quarter 2024 Earnings Conference Call, Vice President of Investor Relations, Michael Rednor, welcomes attendees and introduces key executives, David Gitlin and Patrick Goris, who will discuss the company's results. Rednor highlights that the discussion will focus on operational outcomes, excluding restructuring and nonrecurring items, and cautions that forward-looking statements are subject to risks and uncertainties detailed in Carrier's SEC filings. David Gitlin expresses gratitude to the team for their performance in 2024, particularly during significant portfolio changes, and conveys optimism for 2025. He notes that 2024 was both strong and transformational for Carrier, with 3% organic growth driven by robust global commercial HVAC and aftermarket sales, despite some challenges in residential markets in Europe and China. Overall, company orders increased, with significant growth in HVAC Americas.

The paragraph highlights Carrier's strong financial performance and strategic initiatives. Carrier's global commercial HVAC backlog has increased significantly, setting the stage for double-digit growth in 2025. The company achieved near 100% earnings conversion, margin expansion, and 16% EPS growth through organic growth and productivity. Portfolio transformation was completed with the integration of Viessmann Climate Solutions, divestitures generating over $10 billion, debt reduction, and $2.6 billion returned to shareholders. The company has evolved in phases since its spin-off, focusing on culture, operational execution, product investment, and portfolio transformation. Carrier is now entering a new phase of accelerated growth, with increased market opportunities and a strengthened customer value proposition.

In 2020, the company increased its investments in its product portfolio and focused on digitally enabled life cycle solutions, resulting in a larger addressable market, margin expansion, customer loyalty, and more recurring revenue. They are introducing integrated systems to enhance customer value in homes, buildings, and the cold chain. In homes, they are expanding their energy management offerings in Europe and introducing similar solutions in the U.S. through Carrier Energy, collaborating with utilities to provide integrated battery heat pump systems. For buildings, they launched an efficient integrated cooling solution for data centers called Quantum Leap. In the cold chain, they are moving from selling individual units to offering end-to-end solutions through their Linx Digital platform and Sensitech technologies, creating new opportunities for differentiation and revenue. The company's strategic priorities for 2025 are outlined in Slide 5.

The company is focusing on margin expansion and disciplined capital allocation as part of its growth strategy. By aligning organizational goals, it projects single-digit organic growth and expects a fifth year of double-digit growth in aftermarket and global commercial HVAC by 2025. Productivity improvements are anticipated, aiming for a 100 basis point increase in margins and a 17% rise in adjusted EPS. Despite a challenging 2024, the company managed to gain market share, achieve cost synergies, and introduce new products while reducing overhead costs. In 2025, amidst political and economic uncertainties in Europe, they expect flat to declining market volumes, a revenue headwind from a previous backlog reduction, and double-digit growth in heat pumps and VCS aftermarket, with new product sales contributing positively.

The article discusses the company's introduction of cascadable heat pumps and new air conditioning units, which will be sold through the Viessmann channel. They anticipate revenue synergies and plan to showcase these products at the ISH trade show in Frankfurt. The company expects to continue gaining market share in Europe and aims to increase sales of complete home energy management systems. They are confident in achieving margin expansion and cost synergies, predicting strong growth for the year. Patrick Goris reports that Q4 earnings exceeded expectations with $5.1 billion in sales and 6% organic sales growth, aided by acquisitions and divestitures. The adjusted operating profit rose by 65% due to contributions from Viessmann Climate Solutions, organic growth, and productivity improvements, leading to a 370 basis point increase in operating margin. Adjusted EPS grew by 50% year-over-year to $0.54.

The company's operational performance aligned with projections, benefiting from discrete tax items, but net interest expenses were lighter due to an earlier business closure. Despite a $90 million cash outflow in the quarter, the full-year free cash flow exceeded expectations by $200 million. After closing the residential and commercial fire business, the company accelerated share repurchases, ending 2024 with $1.9 billion repurchased, $1 billion more than forecasted. In the HVAC segment, there was 11% organic sales growth, with significant increases in the Americas, particularly in residential sales. While EMEA sales were flat due to residential and light commercial declines, Asia saw slight growth. The HVAC segment also experienced a 250-basis point increase in adjusted operating margins due to organic growth and productivity.

The paragraph discusses the HVAC and Refrigeration business performance and outlook. In 2024, the HVAC segment experienced growth and increased margins, while the Refrigeration segment reflected anticipated results following its exit from commercial refrigeration on October 1. The global truck and trailer business faced a 10% decline, with significant drops in North America and slight declines in Europe, but growth in Asia partially offset these decreases. The container segment experienced a slight decline, and the aftermarket and Sensitech businesses showed mid-single-digit growth, leading to a 160 basis point increase in operating margin for the quarter. For the full year, Refrigeration was down 1% organically despite a 25% increase in the container segment. Total company organic orders grew in the low teens, with HVAC orders rising 5% and Refrigeration orders surging 55% due to strong growth in North American truck trailer orders. Looking ahead to 2025, the company anticipates mid-single-digit organic sales growth, with total sales projected between $22.5 billion and $23 billion, factoring in a $750 million decrease from exiting commercial refrigeration.

The paragraph outlines the company's growth and financial expectations for 2025. It anticipates organic growth from volume and mix, with a currency translation headwind. The Board segments are expected to grow mid-single digits. In the HVAC sector, the Americas are projected to grow high single digits, driven by strong commercial and residential growth, while Europe is expected to grow low single digits with commercial strength. Asia is projected to have low single sales growth, flat in China, and mid-single outside China. Refrigeration is expected to see growth, particularly in truck, trailer, container, and Sensitech. The company aims to increase its adjusted operating margin by 100 basis points compared to 2024, driven by volume, price, productivity, and absence of commercial refrigeration, with a core earnings conversion at about 30%. Free cash flow is estimated at $2.4-$2.6 billion, with plans to repurchase about $3 billion in shares, having already repurchased $900 million this year.

The paragraph discusses the company's financial outlook and expectations for 2025. It anticipates a 5% reduction in average diluted share count compared to 2024 and projects an adjusted earnings per share (EPS) range of $2.95 to $3.05, representing a 17% increase at the midpoint. This growth is driven by operational performance, including volume leverage, pricing, productivity, and an elimination of $45 million in corporate stranded costs, partially offset by investments and a $0.05 foreign currency headwind. The company expects a $0.05 to $0.10 benefit from net interest expense due to debt reduction and a share count reduction, offset by a 22% tax rate, contributing another $0.10 to $0.15 EPS benefit. They plan to pay down $1.2 billion in debt, increase dividends by 18%, and conduct $3 billion in share repurchases. First-quarter revenue is expected to remain flat sequentially, about $5 billion, with organic growth in global commercial HVAC and refrigeration flat to low single digits. The anticipated margin expansion is 100 basis points, with adjusted EPS between $0.55 to $0.60. Overall, 2024 ended strongly, and 2025 is expected to also be strong financially.

In the paragraph, the discussion revolves around the residential segment's performance, particularly regarding inventory and prebuy activity. David Gitlin explains that there was some prebuying, with $75 to $100 million worth of 410A units being shipped ahead from this year into the previous year. Distributor inventory levels were slightly elevated compared to the previous year, indicating true demand minus the modest prebuy. Movement of goods from distributors to dealers was strong, up by about 15%. Despite some inventory being held, most shipments were in response to demand, and some inventory will be sold in Q1. Jeffrey Sprague and David Gitlin also discuss expectations for high single-digit growth for the year, with a 10% price increase for 454 units contributing to this forecast. They anticipate volume to be flat or slightly down, with base prices up by low single digits.

The paragraph discusses the impact of a refrigerant transition on sales growth, with 80% of the company's volume affected by this transition and expected to result in a 10% price increase for the 454B refrigerant, contributing to approximately 7% sales growth. The remaining 20% of the business is expected to see modest growth. The conversation then shifts to share repurchase plans, indicating that the company will be active in the market throughout the year. Additionally, the outlook for revenue growth is discussed, noting a reduction in backlog and considering the economic and political uncertainty in Europe, expecting flat to slightly negative growth.

The paragraph discusses the company's financial outlook and strategies, particularly focusing on the heating, ventilation, and air conditioning (HVAC) sector. It mentions the normalization of excess backlog by the second quarter and anticipates a full-year headwind of a few percentage points. The plans include increasing the product mix, driven by expected double-digit growth in heat pumps and a slight decline in boilers, with strong demand indicators in Germany. Additional growth is expected from aftermarket sales, pricing adjustments, and $100 million in global revenue synergies, primarily in Europe. The company is leveraging partnerships, such as using the Carrier brand through the Viessmann channel and implementing a multi-brand strategy in China. They also highlight potential share gains and new product introductions. There is a focus on maintaining control over these factors while monitoring market trends. Andrew Kaplowitz inquires about the forecast for HVAC growth in 2025, particularly considering factors like tariffs and the impact of operations in China.

The paragraph discusses the impact of tariffs on steel and aluminum, emphasizing that costs have been mitigated for the current year as most materials are sourced from U.S. vendors, particularly steel. The company is well-positioned with about 80% of its steel volume secured for the year. For the next year's margins, the company anticipates growth driven by organic sales, increased productivity, and product mix, although these will be offset by reinvestments. A question from Julian Mitchell of Barclays about the organic sales guidance indicates that the company expects flat to slight growth in the first quarter, with mid-single-digit growth anticipated for the year. The focus is on key areas like Viessmann and the Americas residential HVAC. Patrick Goris responds by confirming the expectation of flat to low single-digit growth in Q1.

The paragraph discusses the financial guidance and market outlook for a company, focusing on the refrigeration, HVAC, and light commercial sectors. The company anticipates lower sales in Q1 for VCS but expects high single-digit growth in sales starting from Q2, continuing into Q3, and slightly tapering to mid-single digits in Q4, especially in HVAC and Viessmann. In the Americas, there's cautious optimism about the light commercial business, with expected growth in sales in the low to mid-single digits. Concerns about declining ESRA funding for the education sector are mitigated by new bond funding from state referendums, which supports continued growth in K-12 orders. The toughest sales comparison is expected in Q1 due to these market dynamics.

The paragraph discusses the impact of the refrigerant transition on the company's light commercial and residential markets, projecting a 5% to 10% decline in the light commercial sector. It notes that 90% of the company's volume is influenced by this transition, with 80% expected to switch to refrigerant 454B, accompanied by mid- to high single-digit price increases, and the remaining 20% to use 410A in 2025. The K-12 sector and some other verticals are performing well, while sectors like commercial real estate and warehousing are declining, leading to a balanced outlook with low to mid-single-digit growth. The following part includes a question from Steve Tusa of JPMorgan, inquiring about residential inventory and competitive positioning. David Gitlin responds, noting their detailed inventory analysis by distributor, a modest estimated pre-buy impact of $75 million to $100 million, and a 100 basis points market share gain over the past year. The discussion also touches on potential share shifts within the market for the upcoming year.

In the paragraph, David Gitlin discusses concerns about maintaining pricing levels in the industry amidst competitive pressures but expresses confidence in achieving expected price gains. He also talks about significant capacity additions in their North American operations, particularly in commercial HVAC. Gitlin highlights the establishment of a new facility in a remarkably short timeframe, which, along with maximizing output from the Charlotte, North Carolina facility, allows them to more than double their production capacity. This expansion is crucial in meeting demand and positioning the company for substantial growth in the commercial HVAC market in North America.

In the paragraph, David Gitlin discusses the company's improved EBITDA ROS, which was in the low teens last year and is projected to reach the mid-teens this year due to significant cost synergies and reductions. They achieved around $75 million in cost synergies last year, aiming for $150 million this year. Despite limited top-line growth, they focus on cost reduction. In response to Nigel Coe's question, Gitlin confirms that 10% of units this year are 410A compared to 454B, mostly occurring in the first quarter, and acknowledges a 100 basis points market share gain last year.

The paragraph discusses a company's successful transition involving a refrigerant change, highlighting the capacity to produce units with 410A refrigerant and good inventory visibility except in the dealer channel. The inventory situation is well-balanced compared to the previous year. Patrick Goris mentions that 410A units are expected to be phased out in Q1 for residential purposes. Nigel Coe's questions are addressed before the conversation shifts to Deane Dray's inquiries about the Quantum LEAP initiative. David Gitlin reports significant growth in data center sales, from $0.5 billion last year to an expected $1 billion this year, increasing from 10% to 15% of total sales, with future potential in aftermarket sales.

The paragraph discusses a company's strategic focus on the data center vertical, highlighting their early achievements and potential for significant growth in this area by 2025 and beyond. Under Geron's leadership, the team has been successful with hyperscale clients and is applying similar efforts to colocation data centers globally. The company is expanding their capabilities in cooling solutions, including traditional systems and innovative liquid cooling technologies, aiming to be a comprehensive provider for data center cooling needs. They have launched a new initiative called "Quantum Leap" to integrate various cooling solutions and expect continued growth in this sector through 2027. The discussion ends with optimism about meeting the demands of hyperscale clients for global-scale, end-to-end cooling solutions.

The paragraph discusses the company's approach to dealing with foreign exchange (FX) headwinds and tariffs. Patrick Goris mentions a $200 million sales headwind mainly due to currency translation and some transaction side hedging to minimize risk. David Gitlin expands on tariffs, highlighting the company's strong presence and investment in the U.S. He identifies three categories of tariffs: those already implemented (such as with China and aluminum), planned tariffs on places like Canada and Europe, and potential tariffs with Mexico. The company is confident in mitigating the impact of current and discussed tariffs.

The paragraph discusses the uncertainties and preparations related to potential tariffs on operations in Mexico, which could affect the company's exports to the United States. The company is aware of the lack of clarity on exemptions and is focusing on pricing, operational strategies, and other measures to mitigate the impact. They aim to maintain a target of $3 earnings per share despite these challenges. Additionally, the company is increasing production at its U.S. factories, such as in Charlotte. In response to a question about HVAC margin improvements, it's explained that productivity gains and pricing strategies could lead to a year-over-year improvement of approximately 150 basis points.

The article discusses a company's strategic focus on investments for the year, emphasizing a balanced approach between sales and R&D to achieve margin expansion. In a conversation with Andrew Obin from Bank of America, Patrick Goris indicates that pricing might be flat in certain segments, particularly in rough segments and parts of Asia, due to market conditions like those in China's residential and light commercial sectors. Andrew Obin inquires about the company's progress in the aftermarket segment, specifically regarding KPIs, attachment rates, and service as a percentage of the commercial HVAC business. David Gitlin responds by affirming a strong focus on driving double-digit aftermarket growth, highlighting a nearly 50% attachment rate, an increase from a previous 44%, reflecting positive progress in their aftermarket strategy.

The paragraph discusses the performance and projections of Carrier, particularly in relation to connected chillers and commercial revenues. They reported connecting around 45,000 chillers last year and feel confident about driving growth through digital platforms and connectivity. Carrier's commercialized revenues are currently at about 7%, with ambitions to increase this to 30% in the coming years, and it's slightly higher for Commercial HVAC. There is also a discussion on the stronger-than-expected performance in the Americas residential sector, which grew by 35% this quarter, surpassing the expectation of 20-30%. This growth was attributed to higher movement, share gains, and stronger-than-expected demand, especially following a weak performance at the end of 2023.

The paragraph discusses a conversation between David Gitlin, a speaker referred to as Chris, and Patrick Goris regarding concerns in the residential ATEC industry about whether consumers and homeowners are opting more for repairing rather than replacing equipment or choosing cheaper options due to price increases. David Gitlin mentions that despite frequent price hikes and the potential impact of tariffs, they have not observed a significant shift towards repairs over replacements. He emphasizes their careful monitoring of consumer behavior. Patrick Goris adds that only a small portion of the cost to homeowners is attributed to their equipment. The paragraph concludes with Tommy Moll from Stephens asking David about the 15% increase in their residential channel performance, seeking further clarification.

In the paragraph, David Gitlin and Patrick Goris discuss the financial performance and projections for Carrier, particularly regarding residential sales (resi) and their growth expectations. Gitlin highlights the improved ability of their algorithms to anticipate inventory and order movements. He mentions that despite the challenges in predicting short-cycle business metrics, their forecasting has improved over the years. They expect high single-digit growth (HSD) for the year and double-digit growth in the first quarter, driven by mix and price realization. Patrick Goris adds that the movement in Q4 2023 was down in the low teens, but they anticipate mid-teens growth in Q4 2024. Thomas Moll asks for clarification on a 10% price increase and whether there's been any change in expectations from previous quarters, indicating there has been confusion around the base year and metrics used.

The paragraph discusses concerns about potential price aggressiveness from a major market player, but David Gitlin states that nothing has fundamentally changed from their perspective. They have anticipated market trends and feel confident about their pricing strategy, which includes a 10% increase for 454B units compared to 410A units, with an overall 15-20% increase over two years. Gitlin is optimistic about market conditions and pricing balance. The discussion also touches on European market dynamics, specifically in Germany, with attention on the upcoming election in February 2023 which will bring more certainty. Noah Kaye from Oppenheimer Company is also mentioned, seeking insights into country-level market dynamics in Europe.

The paragraph discusses the uncertainties in European energy policy, particularly in Germany, France, and Poland, where there have been suspensions of subsidies. Despite these uncertainties, the European Union remains committed to its 2030 renewable energy goals, including increasing fossil fuel costs through an expanded emission trading system by 2027. This shift is expected to accelerate the transition to heat pumps. There was a surge in subsidy applications in Germany before the elections, and the impact of a potential new government remains to be seen. Ultimately, the focus is on providing customer solutions that are not reliant on regulations and subsidies.

The paragraph discusses the growing focus on integrated solutions involving PV, heat pumps, and batteries in Europe, emphasizing their potential benefits for consumers, businesses, and the environment without relying on subsidies or regulations. The speaker notes the rising gas prices and the EU's likely continued shift away from gas dependency. They also highlight efforts to expand home energy management offerings and maintain cautious, balanced assumptions for future operations, despite challenges faced in the previous year. Key partnerships and strategic involvement with European teams are emphasized.

The paragraph discusses the enthusiasm and strategic advantages of being involved in the European residential market, particularly through the company Viessmann, which is noted for its differentiated channels and product offerings. The transition to heat pumps and overall system solutions is seen as promising. Carrier, having integrated Viessmann, anticipates significant revenue synergies, product introduction, and market share growth. The heads of engineering from Viessmann have enhanced Carrier's technological capabilities. The company expresses confidence in future growth, highlights the contributions of its global team, and extends gratitude to its investors. The paragraph concludes with closing remarks from the operator.

This summary was generated with AI and may contain some inaccuracies.