Transcript: Carrier Global Q2 2026 Earnings Conference Call

Carrier Global (NYSE: CARR ) released second-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

The full earnings call is available at Summary Carrier Global reported strong financial performance in Q2 2026 with a significant increase in orders, particularly in Commercial HVAC, driven by data center demand. The company raised its full-year guidance for sales, operating profit, and EPS due to better-than-expected first half results and strong backlog levels. S. to meet growing demand, particularly in data centers.

The acquisition of 75F is expected to enhance Carrier's BMS capabilities, expanding their total addressable market by $20 billion. Despite some margin pressures due to unfavorable mix and input costs, the company's strong free cash flow supported growth investments and shareholder returns. The company expects continued strong growth in its Commercial HVAC and aftermarket businesses, with data center sales forecasted to double for the second consecutive year. Carrier Global is adjusting its portfolio with the divestiture of Riello and the sale of NORESCO, while also welcoming new acquisitions like 75F.

Future outlook remains positive with expected mid-teens growth in the second half of 2026, supported by strong backlog and improving market conditions. Management highlighted strategic focus on cost reduction and pricing discipline to improve margins, particularly in the European segment. Full Transcript OPERATOR Good morning and welcome to Carrier Global's second quarter 2026 earnings conference call. I would like to introduce your host for today's conference, Michael Redner, Vice President of Investor Relations.

Please go ahead. Michael Redner, Vice President of Investor Relations Good morning and welcome to Carrier Global's second quarter 2026 earnings conference call. On the call with me today are David Gitlin, Chairman and Chief Executive Officer, and Patrick Goris, Chief Financial Officer. Except where otherwise noted, the company will speak to results from continuing operations excluding restructuring costs and certain significant non-recurring items.

A reconciliation of these and other non-GAAP financial measures can be found in the appendix of the webcast. We also remind listeners that the presentation contains forward-looking statements which are subject to risks and uncertainties. Carrier Global's SEC filings, including our Form 10-K and quarterly reports on Form 10-Q, provide details on important factors that could cause actual results to differ materially. With that, I'd like to turn the call over to Dave.

David Gitlin, Chairman and Chief Executive Officer Thanks, Mike, and good morning, everyone. With strong orders, record backlog levels and first half results being better than expected, we are raising our full year guidance on sales, operating profit and EPS. 2Q orders were very strong, up about 40%, with Commercial HVAC up about 65%, driven by continued strength in data centers where orders were up 4x over last year. Our total company backlog, which excludes orders that we expect from long-term agreements with hyperscalers and colos, is now over $8 billion, up about 40% versus last year and up 20% sequentially.

S. We are pleased that our Resi businesses in CSA and CSE were both up high single digits while CSA Light Commercial was up 10%, a similar rate to the first quarter. Our strong free cash flow enabled us to continue to invest in growth and we returned about $640 million to shareholders. We continue to remain proactive in optimizing our portfolio with the divestiture of Riello complete and the sale of NORESCO announced yesterday.

In terms of acquisitions, we are excited to welcome 75F to the Carrier family. As you see on Slide 4, this acquisition accelerates our path of creating intelligent and fully autonomous buildings. There are three primary benefits from this combination. First, 75F's BMS platform is perfectly positioned for small and medium-sized businesses and for international markets.

, 75F expands our TAM by about $20 billion. Second, 75F will significantly enhance our BMS capabilities. It is AI-enabled and cloud-native, which when combined with Carrier's platforms enables agentic AI applications for autonomy and other critical features to drive reliability, uptime, grid interaction, comfort and energy optimization. Also, its wireless and auto-commissioning capabilities enable faster and seamless installations for both new applications and retrofits.

And third, 75F plays an important role in our systems integration strategy, nicely complementing our equipment portfolio, Enlight's data center infrastructure management offering, along with our digital tech stack enabled by Abound and ALC. Intelligent and autonomous buildings are the buildings of the future and Carrier, now enhanced by 75F, is positioned to lead the way. Turning to Slide 5, in 2026, we expect that nearly half of our portfolio, our Commercial HVAC and aftermarket businesses, will have their sixth year in a row of double-digit growth, and these businesses remain very well positioned for continued strong growth going forward.

In addition, it is encouraging that our shorter-cycle RLC businesses in North America and Europe have returned to growth. Though the timing of the recovery in global truck trailer remains unclear, there is clearly pent-up demand as we head into 2027. So, with the record backlogs in our longer-cycle businesses combined with our shorter-cycle RLC businesses in the Americas and Europe turning, we expect the second half to be up mid-teens and are well positioned for strong growth to continue. On Slide 6, last quarter we walked you through our transformational commercial journey since our spin.

I am very proud that our team's strategic investments and great work are yielding such strong results. We are now increasing our full year data center sales outlook to about $2 billion, which will be our second year in a row of doubling our sales in this important vertical. With our recent significant wins, our 2026 data center sales forecast is all in backlog and we continue to partner with hyperscalers and colos to further strengthen our backlog for 2027 and beyond. We continue to gain market share and the rapidly increasing install base that we are delivering today will drive attractive aftermarket growth over the long term.

Turning to CSA Resi on Slide 7, bottom line is that performance has been better than we expected. 5 million units this year, largely stable versus last year. Field inventory levels continue to remain healthy, ending 2Q down about 25% versus last year. We also continue to invest in differentiation, including building out our digital ecosystem, a key priority for us leveraging Viessmann's cutting-edge digital platform.

We now have about 55,000 channel partner technicians monitoring systems in real time, up about 35% from a year ago, driving customer loyalty and channel efficiency. We are now raising our full year expectations for CSA Resi sales to be up high single digits. Resi sales in Europe are also improving. As you can see on Slide 8, sales were up high single digits in 2Q with heat pumps up about 20% and boilers down high single digits.

Market dynamics remain favorable with continued high prices for natural gas and Germany recommitting to subsidies. We also remain very encouraged by pre-order activity for our new Vitocal 200 unit. This Viessmann-branded offering has all the benefits that our customers have come to expect: high efficiency, low noise, great aesthetics and connectivity, along with lower product and installation costs. It will be a tremendous secondary offering for Germany and the primary offering for most other countries in Europe.

We are on track to formally launch in the fall and expect this new product to significantly increase our TAM. Though our European commercial sales were lower than we expected in the first half, our 20% 2Q orders growth and strengthening backlog give us confidence in the second half being up mid-single digits. Segment margins in 2Q were disappointing. We are seeing the benefit from improved volume and price/cost, but that was offset by unfavorable mix and selling investments.

We will continue to drive strong growth initiatives and will take a more aggressive and structured approach to cost reduction and pricing discipline. Last month, we appointed Thomas Donato as the new President of this segment. I am confident that Thomas and the team will take the right actions to get this business to mid-teens operating margins over the next few years. Moving on to Aftermarket on Slide 9, we remain on track for double-digit aftermarket growth.

Through the first half, we are up high single digits and we have the playbook, team and plans in place to deliver double-digit growth for the full year. On Slide 10, you see a lot more greens for our business units compared to our original guide, thus enabling us to raise our full year outlook for sales, operating profit and EPS and will serve us well as we head into 2027. With that, I will turn it over to Patrick. Patrick Goris, EVP & CFO, Chief Strategy Officer Patrick, thank you Dave, and good morning everyone.

Please turn to slide 11. 4 billion. 1 billion. 86, better than expected.

Organic sales growth of 3% was driven by improving residential and light commercial end markets in the Americas and Europe. 2% was a bit better than expected. The year-over-year decline largely reflects the benefit of organic growth and strong productivity offset by unfavorable mix and increased input costs. Adjusted EPS declined 7% driven by lower operating profit and a higher effective tax rate, partially offset by a tailwind from a lower share count.

You will find the year-over-year adjusted EPS bridge on slide 20. Free cash flow of $810 million was very strong. Moving on to the segments, starting with CSA on slide 12, organic sales for the segment increased 4%. Dave already covered residential and light commercial.

With respect to commercial, sales were down due to the timing of data center deliveries. We expect a significant sequential and year-over-year pickup in Q3. 4% was ahead of our guide. Compared to the prior year, the margin decline reflects stronger pricing offset by unfavorable mix and increased input costs.

I will skip slide 13 as Dave already covered the main points. Turning to the CSAME segment on slide 14, organic sales grew 4% ahead of expectations, reflecting continued strong performance in India, Southeast Asia, and Australia, with all three areas growing above 20% in the quarter driven by data centers. The Middle East delivered very strong sales growth of about 35% despite a very challenging operating environment. Aftermarket continues to be strong in this region, up about 12%.

Residential and light commercial in China remains the main drag for the segment. As expected, segment operating margin was about 12%. Moving to the CST segment on slide 15, organic sales were flat. The container business had another very strong quarter with sales up 40%, offsetting continued pressure in global truck trailer, which was down low teens.

The decline in segment operating margin reflects the margin differential between container and truck trailer. Turning to Q2 orders on slide 16, total company orders in the quarter were very strong, up about 40%, with growth across all segments and most businesses. Our backlog is at record levels and supports an accelerating organic growth outlook for the balance of the year. 5 billion prior guide.

We now expect CSA residential and light commercial sales growth of approximately high single digits and CSE residential and light commercial sales growth in the low single-digit range compared to our prior outlook of down high single digits and roughly flat, respectively. Note that our updated outlook now reflects about a $125 million year-over-year revenue headwind due to the upcoming exit of Noresco. So to summarize, we are increasing sales by over a billion dollars organically versus the prior guide, with about half of that related to improved sales in CSA residential and light commercial, and the other half related to increased data center sales.

About $200 million of sales will drop out of our outlook versus the prior guide from the Noresco divestiture and relatively small changes across the other segments, which takes our sales outlook to about 23 billion for 2026. 8 of EPS. Second-half adjusted operating profit and EPS will both be up about 50% year over year with strong earnings conversion. S.

site. S. site. We now expect full-year capex to be about $600 million.

5 billion for the year. You will find full-year adjusted EPS bridges on slides 21 and 22 and, as usual, additional guide items are on slide 23. Finally, let me provide some color on the third quarter. We anticipate Q3 revenues to be just below $6 billion, including about a $200 million year-over-year impact from the Riello and Noresco divestitures.

75 of adjusted EPS. S. and significantly higher commercial sales globally. With that, operator, please open the line for questions.

OPERATOR We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one. Again, we ask that you pick up your handset when asking a question to allow for optimum sound quality.

If you're muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Scott Davis with Melius Research. Your line is open.

Please go ahead. Scott Davis, Analyst at Melius Research Hey, good morning, guys. Looked like a pretty good quarter overall. Just only nip really is the margin decline issue.

Can you go into a little bit more detail, kind of the mix versus price-cost, the challenges that you had there, how much of that was perhaps timing? You mentioned a change in leadership, so perhaps a little bit of a different mandate as well, but maybe a little bit more detail. Patrick Goris, EVP & CFO, Chief Strategy Officer Will do, Scott. So operating profit and margin was down versus last year.

Key elements as I mentioned: favorable volume, price, and productivity. We do have some unfavorable mix — I'll get to that in a little bit — and then, of course, there is also the timing of the tariff mitigation and lower JV income. In terms of timing of the tariff mitigation, you may recall that the tariffs went into effect early April and the pricing associated to mitigate some of that went into effect at the end of the month. And so, as expected, during the second quarter, the impact of tariffs and pricing associated with tariffs was a net negative, and that was a headwind to our margins in the quarter.

With respect to mix, within Europe, besides strong heat pump growth, we had good growth in battery and solar, which actually has quite lower margins. Within transportation, container does well but has lower margins than truck and trailer, and then within CSA, think of it as new construction was a little bit higher mix than what we expected, which drove down overall margin — still good margin; new construction just not as strong as replacement. So those are some of the main elements. David Gitlin, Chairman and Chief Executive Officer Scott — yeah, Scott, on your second— Go ahead.

Scott Davis, Analyst at Melius Research No, go ahead please, please. David Gitlin, Chairman and Chief Executive Officer Yeah, Scott, I was just going to say, on the second part of your question on the leadership change, we're really excited to have Thomas Donato on board. We can't thank Thomas Heim enough for everything he did. But in terms of this next chapter, we really have to do a better job on both price and cost, to state the obvious.

So I think that Thomas brings great experience from his days at places like Rockwell Automation and ABB and Bosch, and we're going to be a lot more disciplined on the price side, and there's a lot of costs that we have to take out, and that includes footprint, supply chain, G&A.