Carrier Global Corp (CARR)

Conclusion

Carrier Global Corporation makes heating, cooling and ventilation equipment, building energy management systems and transport refrigeration products for residential, commercial and transport customers, mainly in the Americas, Europe and Asia Pacific. At a price of 53.33 USD on 2026-11-09, the market capitalisation is 43.6 billion USD.

The verdict is fair. The fair value band runs from 41.93 to 62.89 USD with a midpoint of 52.41 USD, a margin of safety of -1.7% at the current price. The discounted cash flow gives 42.32 USD per share, and the fair value from historical multiples is 62.50 USD. Price-to-free-cash-flow stands at 18.6x against a ten-year median of 25.6x, but enterprise value to EBITDA is 226.6x against a median of 17.3x, a premium of 1210.5%, because EBITDA is depressed. The reverse DCF implies revenue-like growth of 10.0% a year, while revenue grew 4.5% a year over five years and free cash flow per share grew 5.0%.

What holds the case up is a free cash flow after stock-based compensation of 2.29 billion USD, a five-year share count change of -0.8%, and seven earnings beats in the last eight quarters. What would break it is a net debt to EBITDA of 44.0x, an interest coverage of -3.35x, and a return on invested capital of -4.4% against a cost of capital of 10.0%.

Financial health

Financial strength is red: the net debt to EBITDA of 44.0x and the interest coverage of -3.35x are both assessed bad, while the current ratio of 0.997 and the Altman Z-score of 2.12 are neutral. The quick ratio is 0.545 and debt to equity is 1.18. The Altman Z-score of 2.12 sits in the grey zone. The Altman model was designed for manufacturers, and Carrier is one, so the reading applies directly. Insolvency risk: low, about 0.9% by the estimate of the Ohlson model over one to two years. Operating profit is negative, so it does not cover the interest bill, and the company is leaning on its balance sheet and cash flow while earnings are weak.

Earnings quality

Earnings quality is yellow, held up by a Beneish M-score of -2.52 (unlikely to be manipulated) and a share count that fell 0.8% a year over five years, and pulled down by a five-year free cash flow conversion of 52.4%. The trailing twelve-month free cash flow conversion is not available. The accrual ratio is -1.6%, which points to cash earnings exceeding accounting earnings. Stock-based compensation is 0.26% of revenue. The Piotroski score is 4 out of 9. The company beat earnings expectations in 7 of the last 8 quarters, with an average surprise of 7.7%. Estimates are being cut: the current year estimate changed -0.7% over 90 days with 5 downgrades against 3 upgrades in the last 30 days, and the next year estimate changed -3.4% with 9 downgrades against 4 upgrades, despite forecast growth of 11.4%.

Profitability

Profitability is red. The operating margin is -5.3% against a ten-year median of 12.8%, the net margin is -7.9% against 11.4%, and the gross margin is 24.6% against 29.0%. Return on invested capital is -4.4% against a cost of capital of 10.0%, a return on invested capital minus cost of capital value of -14.4%, which the model classes as destroying value. The five-year median return on invested capital was 14.6%, so the decline is recent. Return on equity is -17.9%. The DuPont split for 2025 shows a net margin of 6.8%, an asset turnover of 0.58 and an equity multiplier of 2.69, so leverage has been amplifying returns, not creating them. Operating margin stability is 27.3%.

Growth

Growth is yellow. Revenue compounded 7.9% over three years and 4.5% over five years, and revenue grew in 4 of 8 comparable years. Earnings per share did not grow: the three-year compound change is -24.7% and the five-year change is -4.9%. Free cash flow per share compounded 7.5% over three years and 5.0% over five years, a better trend than earnings. The growth that matters for the price is the one the market expects: the reverse DCF implies 10.0% a year, which is above what revenue and cash flow have delivered over five years.

Valuation

Valuation is yellow, with the verdict neutral and the margin of safety at -1.7%. Price to free cash flow of 18.6x is 27.6% below its ten-year median of 25.6x, price to sales of 1.91x is 11.1% below 2.15x, and price to book of 4.34x is 14.7% below 5.09x. Enterprise value to EBITDA of 226.6x is far above its median of 17.3x, a premium of 1210.5%. The historical price to earnings median is 20.6x, but a current price to earnings value is not available because earnings are negative. The DCF uses a discount rate of 11.6% and gives 42.32 USD per share. About 46% of its value rests on the terminal value. The fair value band is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped long-term growth, not a price target. The dividend yield is 1.8% and the payout on free cash flow is 33.5%.

Risks

The main risk is leverage: a net debt to EBITDA of 44.0x and interest coverage of -3.35x leave little room if earnings stay negative, and a current ratio below 1 means short-term obligations exceed liquid assets. Return on invested capital of -4.4% below the 10.0% cost of capital means each new dollar invested currently destroys value, so growth would not help until returns recover. Falling estimates and negative earnings growth could weigh on the share price if the expected recovery is delayed. Not available: the trailing twelve-month free cash flow conversion and the current price to earnings ratio. This analysis has no debt maturity schedule and no revenue by segment, so refinancing risk and the contribution of each business line cannot be judged.