Is the Market Overlooking Carrier Global Stock’s Next Move?

We think Carrier Global (CARR) stock could be a good value buy. It is currently trading lower than average valuation, is growing, even though modestly, and has strong margins to go with its low valuation.

Buying stocks with low valuations or trading well below their peaks but maintaining strong margins allows investors to capture mean reversion and valuation re-rating potential. The downside risk is potentially less because high-margin businesses can sustain earnings and recover faster when sentiment or market conditions improve

What Is Happening With CARR

CARR may be down -23% so far this year but is now 35% cheaper based on its P/S (Price-to-Sales) ratio compared to 1 year ago, and also trades at a P/E (Price-to-Earnings) ratio that is below S&P 500 median.

The stock may not reflect it yet, but here is what’s going well for the company. While North American residential demand has softened, impacting overall revenue, Carrier’s margins are buttressed by robust commercial HVAC performance, including new hyperscaler data center contracts, and double-digit aftermarket service expansion. Strategic cost actions set for 2026 further support future profitability. This shift towards higher-value climate and energy solutions, like advanced heat pumps, is driving growth in critical sectors. However, investor apprehension over residential market headwinds and recent guidance adjustments have kept the valuation discounted, despite the strong commercial momentum.

CARR Has Reasonable Fundamentals

• Revenue Growth: 1.9% LTM and 3.3% last 3 year average. Low growth, but this is a margin and value play.
• Strong Margin: Nearly 10.0% 3-year average operating margin.
• No Major Margin Shock: Carrier Global has avoided any large margin collapse in the last 12 months.
• Modest Valuation: Despite encouraging fundamentals, CARR stock trades at a PE multiple of 11.1

Below is a quick comparison of CARR fundamentals with S&P medians.

*LTM: Last Twelve Months

But What Is The Risk Involved?

While CARR stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. CARR fell about 25% during the Covid pandemic and took a bigger hit of around 41% in the inflation shock. These dips show that even with strong fundamentals, the stock isn’t immune when the market turns sideways. Downturns can still push it into double-digit losses fairly quickly. Good qualities don’t guarantee smooth rides when broader conditions get tough.

For more details and our view, see Buy or Sell CARR Stock.

Stocks Like CARR

Not ready to act on CARR? Consider these alternatives:

1. Accenture (ACN)
2. Adobe (ADBE)
3. PayPal (PYPL)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Meaningfully below 1Y high
3. Current P/S < last few year average
4. Strong operating margin
5. P/E ratio below S&P 500 median

A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:

• Average 6-month and 12-month forward returns of 12.7% and 25.8% respectively
• Win rate (percentage of picks returning positive) of > 70% for both 6-month and 12-month periods
• Strategy consistent across market cycles

Portfolios Beat Stock Picking

Individual stocks are unpredictable. A smart portfolio keeps you invested, limits downside shocks, and provides upside exposure

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.