$3.1 billion impairment charge sends Carrier shares down 7% premarket
Key Facts
Carrier shares fell 7% in premarket trading on October 29 to $52.09, after the company reported third-quarter results and recorded a $3.1 billion non-cash impairment charge. Carrier said the charge stemmed from an impairment of goodwill associated with its Climate Solutions Europe unit. The U.S. GAAP operating loss was $2.273 billion, compared with operating profit of $539 million in the same period a year earlier. By contrast, sales and adjusted EPS rose, while orders exceeded year-earlier levels. Investing.com reported that the shares stood at $52.09 in premarket trading; that measure does not specify their performance at the session close.
Carrier's quarterly sales were $6.263 billion, versus $5.579 billion a year earlier, an annual increase of 12%. Organic sales rose 15%, a company measure that excludes the effect of certain changes in business scope and currencies. But the profitability picture differed sharply depending on the measure: diluted EPS was a loss of $3.16, compared with earnings of $0.47 in the third quarter of the previous year. Adjusted EPS was $0.87, up 30% from $0.67 a year earlier. Investing.com reported that adjusted EPS and revenue exceeded analysts' estimates of $0.77 and $6.1 billion, respectively.
The company attributed the improvement in adjusted operating margin to higher volume and favorable pricing, partly offset by higher input costs and tariffs. The margin was 17.4% in the third quarter, compared with 14.8% a year earlier, an increase of 260 basis points. Free cash flow rose to $674 million from $224 million in the year-earlier period. These figures point to a stronger operating picture than the accounting loss, which was weighed down by the goodwill impairment charge, while input costs and tariffs remained among the factors limiting margin improvement. Chief Executive David Gitlin said orders, sales and adjusted EPS rose by rates ranging from 15% to 35%.
Demand strength was more pronounced in commercial HVAC and data center activities. Carrier said total organic orders increased about 35% from a year earlier. Commercial HVAC orders rose about 60%, while data center orders surged about 300%. The orders helped lift the backlog to more than $8.5 billion as of September 30, up 60% year over year. Gitlin described backlog levels as record-high and said they gave management confidence in continued momentum into 2027 and beyond.
Carrier raised its 2026 sales forecast to a range of $23.8 billion to $24.0 billion, from about $23 billion previously. The company expects organic growth of about 10%, after its prior guidance pointed to mid- to high-single-digit growth. By contrast, the expected adjusted EPS range is now $2.85 to $2.90, compared with prior guidance of about $2.90. The company therefore kept the upper end of its previous guidance but lowered the lower end of the new range. Adjusted operating profit guidance remained at about $3.5 billion, while the free cash flow forecast stayed at about $2 billion.
The profit outlook adjustment comes alongside sales and order growth, as the quarterly results show a divergence between the accounting loss and adjusted profitability. The company said it expects to return about $2.3 billion to shareholders during 2026 through dividends and share repurchases. The results release date and conference call had been announced previously on October 8. Carrier scheduled the call for October 29 at 7:30 a.m. Eastern Time, with a replay available later that day. Gitlin said record backlog levels support management's confidence in continued momentum into 2027 and beyond.