Should You Buy the Dip in This ESG Stock?

ESG stands for environmental, social, and governance. ESG investing is gaining rapid prominence as it focuses on a company or investment’s non-financial factors to determine its sustainability.

Shares of leading ESG-compliant company Carrier Global Corporation (CARR) have declined 18.1% in price year-to-date and 21.5% over the past year to close the last trading session at $44.39. It is currently trading 24.6% below its 52-week high of $58.89, which it hit on August 30, 2021.

CARR provides heating, ventilating, air conditioning (HVAC), refrigeration, fire, security, and building automation technologies worldwide. It operates through the HVAC, Refrigeration, and Fire & Security segments.

Through its highly efficient Lynx platform, the company raises its customers’ ESG profiles by reducing spoilage and using energy more efficiently. By 2030, CARR aims to achieve carbon-neutral operations, reduce energy intensity by 10%, achieve water neutrality across its operations, and reduce its customers’ carbon footprint by more than one gigaton. It also seeks to achieve gender parity and a diverse workforce.

The company recently announced the acquisition of Toshiba Carrier Corporation (TCC). CARR’s Chairman and CEO David Gitlin said, “Toshiba Carrier’s differentiated technology, strong channel, and global design and manufacturing footprint allow us to benefit from growing electrification and sustainability trends.”

CARR has raised its full-year adjusted EPS guidance from the range of $2.20-$2.30 to a range of $2.25 -$2.35. It also upgraded its sales guidance for fiscal 2022 from $20 billion to $20.8 billion.

Here’s what could influence CARR’s performance in the upcoming months:

Acquisition

On July 31, 2022, CARR announced that it had completed the acquisition of substantially all of Toshiba Corporation’s ownership stake in Toshiba Carrier Corporation (TCC). CARR’s Chairman and CEO David Gitlin said, “This acquisition presents tremendous growth opportunities for Carrier in the fast-growing energy-efficient VRF and heat pump markets.”

Robust Financials

CARR’s adjusted net income increased 5.6% year-over-year to $599 million for the second quarter ended June 30, 2022. The company’s adjusted EPS came in at $0.69, representing an increase of 7.8% year-over-year. Also, the company’s adjusted operating profit increased 4.4% year-over-year to $857 million.

Favorable Analyst Estimates

Analysts expect CARR’s EPS for fiscal 2022 and 2023 to increase 2.6% and 9.5% year-over-year to $2.32 and $2.54, respectively. Its revenue for fiscal 2023 is expected to increase 5.6% year-over-year to $21.57 billion. It surpassed Street EPS estimates in each of the trailing four quarters.

Higher-than-industry Profitability

In terms of trailing-12-month net income margin, CARR’s 13.50% is 100.4% higher than the 6.73% industry average. Likewise, its 14.27% trailing-12-month EBITDA margin is 9.9% higher than the industry average of 12.98%. Furthermore, the stock’s trailing-12-month asset turnover ratio came in at 0.82%, compared to the industry average of 0.79%.

POWR Ratings Show Promise

CARR has an overall rating of B, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. CARR has a B grade for Quality, in sync with its higher-than-industry profitability.

It has a B grade for Sentiment, consistent with its favorable analyst estimates.

CARR is ranked #11 out of 46 stocks in the A-rated Industrial – Building Materials industry. Click here to access CARR’s Growth, Value, Momentum, and Stability grades.

Bottom Line

As ESG investing gains traction worldwide, ESG-compliant companies such as CARR are expected to benefit. Given its robust financials, favorable analyst estimates, and higher-than-industry profitability, it could be wise to buy the dip in the stock.

How Does Carrier Global Corporation (CARR) Stack Up Against its Peers?

CARR has an overall POWR Rating of B, equating to a Buy rating. Check out these other stocks within the Industrial – Building Materials industry with an A (Strong Buy) or B (Buy) rating: Holcim Ltd (HCMLY), Quanex Building Products Corporation (NX), and Owens Corning (OC).

CARR shares were trading at $44.11 per share on Wednesday morning, down $0.28 (-0.63%). Year-to-date, CARR has declined -18.02%, versus a -9.63% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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