Carrier Global (CARR) Morgan Stanley‘s 12th Annual Laguna Conference 2024 summary

Transformation and portfolio strategy

• Transformation nearly complete, with a simpler, focused, higher-growth business model aligned to secular trends for sustained growth.

• Closed Viessmann Climate Solutions acquisition and reached agreements to divest five businesses, exceeding $10 billion in gross proceeds.

• Proceeds and strong cash flow enabled significant net debt reduction and a share buyback plan to be completed by end of next year.

• 2025 will focus on execution, with a portfolio now 85% HVAC and 15% transport, refrigeration, and cold chain.

• Bolt-on M&A will continue selectively, but the main focus is on operational execution and organic growth.

Market outlook and growth drivers

• Commercial HVAC growth driven by data center demand, with investments in capacity and technical capabilities to win large-scale projects.

• Residential and light commercial in North America show high margins and market share, with ongoing refrigerant transition management.

• European heat pump market expected to grow due to regulatory targets and subsidies, with Viessmann positioned for share gains.

• Transport refrigeration expected to recover in 2025, with current strength in Asia and Europe offsetting North American softness.

• Aftermarket and service business targeted for double-digit growth, leveraging digital platforms and connected solutions.

Viessmann integration and synergies

• Viessmann sales expected down mid-teens in 2024, with Q4 stabilizing and growth resuming as comps ease.

• Revenue growth driven by heat pump mix, pricing, aftermarket, and cross-selling opportunities.

• Revenue and cost synergies already being realized, with $75 million in cost synergies this year and $200 million targeted by year three.

• Viessmann's strong channel and product differentiation support price stability and margin resilience despite increased competition.

• Margin targets for Viessmann are high-teens EBITDA by year-end, with aggressive cost actions positioning for higher conversion as volumes recover.