Key Takeaways:
- Data Center Momentum Accelerating: Carrier Global expanded its data center business to $1 billion in 2025 and expects $1.5 billion in 2026, with Q4 orders up 4x year-over-year as hyperscalers adopt its cooling solutions for AI infrastructure.
- Residential Destocking Nearing Completion: Carrier Global reduced field inventories by 30% year-over-year to 2018 levels and expects the market to absorb the remaining 2 million unit overage in 2026, positioning the company for recovery as the $22 billion residential HVAC cycle normalizes.
- Fair Value at $81: Based on 4% revenue growth through 2028 and operating margins expanding to 17% as commercial HVAC scales, Carrier Global could reach $81 per share by December 2028.
- Upside of 21%: This target implies a total return of 21% from the current price of $67, translating to an annualized return of 7% over the next 3 years.
Breaking Down the Case for Carrier Global Co.
Carrier Global (CARR) reported Q4 2025 results with total revenue of $22 billion and adjusted operating profit of $3.4 billion, reflecting a 3% organic decline driven by residential HVAC market weakness that offset double-digit growth in commercial systems and aftermarket services.
The company’s data center cooling business reached $1 billion in annual revenue and secured $1.5 billion in 2026 orders, with Q4 bookings up 4x as hyperscalers deploy chillers for AI infrastructure.
Carrier Global guided 2026 revenue to $22 billion with flat to low-single-digit organic growth, as double-digit commercial HVAC expansion offsets high-single-digit residential declines from continued destocking.
Management reduced overhead by $100 million and cut 3,000 positions in 2025 to protect margins during the cyclical downturn, with CFO Patrick Goris noting that “productivity, including the cost actions that we have taken, is close to $400 million” for 2026.
The residential segment faced 40% volume declines in Q4 as distributor inventories fell 30% year-over-year to 2018 levels, absorbing half of the 3.5 million unit overage accumulated between 2020 and 2024 when elevated replacement demand exceeded the historical 9 million annual average.
CEO David Gitlin Q4 2025 earnings call stated “we are the best positioned company in our industry when our short-cycle businesses recover, which they surely will, and we are poised to see outsized gains when they recover,” which signals confidence in mean reversion as mortgage rates stabilize and existing home sales normalize.
Carrier Global announced the $430 million sale of its Riello business to Ariston Group and plans $1.5 billion in share repurchases for 2026, returning $3.7 billion to shareholders in 2025 through buybacks and dividends while maintaining investment in data center capacity and aftermarket technician headcount.
The company trades at 21x forward earnings despite guiding adjusted EPS to $2.80 in 2026, up 8% year-over-year, as investors weigh near-term residential cyclicality against structural growth in data center cooling where water-cooled chiller share has increased 4x since the 2020 spin.
What the Model Says for CARR Stock
Carrier Global’s $1.5 billion data center pipeline and $100 million overhead reduction position the company for margin expansion as residential HVAC destocking completes through 2026, supporting recovery from 9.7% operating margins toward normalized mid-teen profitability.
The model assumes 4.2% revenue growth through December 2028 and 16.5% operating margins which reflects market assumptions of commercial HVAC scaling to $2 billion and residential volumes normalizing to 8 million annual units, yielding an $80.91 target price at a 21x exit multiple.
That implies 20.6% total upside from $67 and a 6.7% annualized return over 2.9 years, falling short of the typical 10% equity hurdle rate despite $1.5 billion in planned buybacks and $430 million in Riello divestiture proceeds.
The model signals a Hold, as a 6.7% annualized return at 21.0x earnings reflects insufficient compensation for residential cyclicality risk and does not justify immediate capital allocation despite data center momentum and 4x growth in water-cooled chiller share since spin.
A 6.7% annualized return falls below a 10% equity hurdle rate, requiring operating margins to expand 650 basis points to 16.5% and data center revenue to reach $1.5 billion while maintaining a 21.0x earnings multiple.
Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for Carrier stock:
1. Revenue Growth: 4.2%
Carrier Global posted 18.7% revenue growth in 2021 and 9.6% in 2023, driven by commercial HVAC expansion and post-pandemic replacement cycles before residential destocking reduced 2025 revenue by 3.3%.
Carrier guided 2026 to flat or low-single-digit organic growth as $1.5 billion in data center revenue and double-digit aftermarket expansion offset high-single-digit residential declines from 6.5 million industry units.
Market assumptions project 1.3% growth for 2026, implying minimal recovery, while the model’s 4.2% CAGR through 2028 requires commercial HVAC to sustain double-digit gains and residential volumes to revert toward the 9 million historical average by 2027.
This exceeds the 3-year historical CAGR of 2.1% and assumes Carrier Global stock absorbs the remaining 2 million residential unit overage without losing market share while data center orders convert to revenue at planned capacity.
Perfect execution across three cycles is required, as residential recovery depends on mortgage rates falling below 6%, data center revenue scaling without hyperscaler consolidation, and commercial backlog converting at 80% margins without labor cost inflation.
2. Operating Margins: 16.5%
Carrier Global expanded operating margins from 11.3% in 2022 to 15.8% in 2024 through commercial HVAC scale and aftermarket leverage before residential under-absorption compressed 2025 margins to 9.7%.
The company actioned $400 million in productivity for 2026, including $100 million from overhead reductions and 3,000 headcount cuts, while guiding first-quarter margins to 10% as residential manufacturing runs at half capacity.
Market assumptions project 15.5% EBIT margins for 2026 which reflects partial recovery, while the model’s 16.5% target requires $60 million in commodity headwinds to be offset entirely and CSA residential margins to exit 2026 above 20%.
This sits above the 1-year operating margin of 15.8% and assumes mix headwinds from residential weakness reverse as data center and aftermarket revenue reaches 45% of total sales by 2028.
Margin expansion depends on residential de-stocking completing without promotional pricing, data center CDU sales sustaining 25% gross margins, and European heat pump transitions avoiding subsidy cuts that compress boiler replacement economics.
3. Exit P/E Multiple: 21x
Carrier stock traded at 23.6x forward earnings in December 2024 before compressing to 19.0x in December 2025 as residential headwinds and EBIT margin volatility reduced investor confidence in near-term profitability.
However, market assumptions price Carrier Global stock at 23.9x forward earnings for February 2026, reflecting optimism that data center momentum and cost actions support a premium to the 20.3x 5-year historical average.
The model applies a 21.0x exit multiple in December 2028, below the current market assumption of 23.9x, recognizing that 16.5% operating margins and 4.2% revenue growth position the company as a mature industrial with limited re-rating potential.
This compares to the market assumption of 23.9x for 2026 and reflects valuation discipline as the model assumes double-digit aftermarket growth and data center scaling are already embedded in consensus expectations.
A 21.0x multiple requires Carrier Global stock to sustain residential market share above 15%, convert $1.5 billion in data center backlog without margin dilution, and maintain free cash flow conversion above 90% while earnings growth decelerates toward mid-single digits.
What Happens If Things Go Better or Worse?
Carrier Global stock returns hinge on residential HVAC recovery timing, data center revenue conversion rates, and whether operating margin expansion sustains through 2030 as commercial HVAC scales.
- Low Case: If residential de-stocking extends into 2027 and data center orders stall, revenue grows 4.1% annually while net income margins settle near 11.1% → 3.1% annualized return.
- Mid Case: With residential volumes reverting to 8 million units by 2027 and data center revenue reaching $2 billion, revenue grows 4.6% annually as net income margins expand to 11.7% → 7.3% annualized return.
- High Case: If commercial HVAC sustains double-digit growth and aftermarket coverage exceeds 120,000 chillers, revenue accelerates to 5.0% annually while net income margins approach 12.2% → 10.9% annualized return.
How Much Upside Does Carrier Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E multiple
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From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
