Carrier Stock Has Been a Winner. This Analyst Says to Buy. -- Barrons.com

Al Root

Shares of Carrier Global are up after catching an upgrade from an analyst who sees more room for gains despite the stock's recent strong performance.

Monday, Citi analyst Andrew Kaplowitz upgraded shares of the heating, ventilation, and air-conditioning provider to Buy from Hold. His price target went to $74 a share from $65.

Carrier stock was up 1.4% in early trading at $63.78 while the S&P 500 and Dow Jones Industrial Average were flat and up 0.3%, respectively.

Kaplowitz's new target values the stock at about 24 times his estimate for of 2025 earnings per share. Carrier stock has traded for about 17 times estimated earnings since 2020, when it was separated from United Technologies, which is now known as RTX.

Historically, the valuation has been lower than Kaplowitz envisions, but Carrier is morphing into a very different business.

"Carrier will be done/mostly done with its transformation entering 2025, leading to an alternative 'pure play' HVAC company with an improving [valuation] multiple, wrote Kaplowitz. "Ultimately, Carrier remains a work-in-progress and we don't expect 'straight-line' improvement, but the company is well run with leading share in one of our favorite end markets."

Carrier has been selling slower-growing businesses and leaning into higher-growth areas. An example is heat pumps, which benefit from a shift toward using electricity, rather than heating oil or natural gas, to heat and cool homes.

Barron's wrote positively about Carrier stock in May 2023, also believing shares deserved a higher multiple as management reshaped its portfolio. The article appeared shortly after Carrier announced the acquisition of heat pump maker Viessmann Climate Solutions and said it planned to leave the refrigeration, fire, and security businesses.

Carrier stock has gained about 50% since then. At least one Wall Street analysts, Kaplowitz, sees more gains ahead.

Overall, about 36% of analysts covering Carrier stock rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Carrier shares is about $66.

Write to Al Root at allen.root@dowjones.com

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June 24, 2024 10:54 ET (14:54 GMT)

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