Carrier (CARR) — Margin Momentum Meets Cash-Flow Strain After Big M&A

Carrier posts strong FY revenue and profit — but cash flow and debt tell a different story#

Carrier reported FY2024 revenue of $22.49 billion and reported net income of $5.60 billion, a year-over-year surge in the income line that contrasts sharply with operating cash flow and balance-sheet trends that tightened materially over the same period. The revenue jump from FY2023’s $18.95 billion represents +18.68% growth, while the reported net income rise (from $1.35 billion in FY2023) is +314.81%, numbers that on their face signal a company moving from cyclical weakness to profitable scale. Yet the firm’s free cash flow collapsed to $44 million in FY2024 from $2.17 billion in FY2023 (a change of -97.97%) and net debt rose to $8.74 billion—revealing a simultaneous story of aggressive M&A and one-time accounting items that materially affect cash conversion and leverage.

This tension — between headline profitability and deteriorating cash metrics — is the single most important development for [CARR]. Investors now must balance structural improvements in margin and portfolio mix against cash-generation shortfalls and near-term leverage implications. The rest of this report walks through the underlying drivers, reconciles key metric conflicts in the public data, and explains why the company’s strategic moves matter for financial durability.

Financial performance: revenue, margins and the unusual net-income jump#

Carrier’s top line expanded markedly in FY2024. Revenue rose to $22.49B from $18.95B in FY2023, a calculated increase of +18.68% (22.49 − 18.95 ÷ 18.95). Gross profit likewise rose to $6.02B, up +16.44% versus FY2023’s $5.17B, producing a FY gross margin of 26.79%. Operating income for FY2024 was $2.65B, for an operating margin of 11.77%, modestly above FY2023’s 11.40% (operating margin change +0.37 percentage points). Those figures are consistent with management’s narrative of improving mix and productivity.

Where the numbers become more complex is at the bottom line and in cash flow. The FY2024 reported net income of $5.60B implies a net margin of 24.92%, a substantial step-up from FY2023’s 7.12% net margin. That large jump in reported profit is not matched by operating cash flow, which signals the presence of significant non-cash items, one-time gains, divestiture proceeds or accounting adjustments that boosted reported earnings without proportionate cash realization.

Table 1 summarizes the last four fiscal years’ headline P&L trends and the margins we calculate from the raw statements provided.

(Revenue and profit lines: Carrier FY financials; margins computed from those raw numbers.)

The key inference is that Carrier’s operating performance (revenue growth, gross-profit expansion and modest operating-margin improvement) is real. The disparity between operating cash flow and reported net income, discussed next, is the critical caveat.

Quality of earnings and cash-flow reconciliation: why net income diverges from cash generation#

The FY cash-flow statement raises immediate red flags on earnings quality and cash conversion. Carrier reported net cash provided by operating activities of $563 million in FY2024, compared with reported net income of $5.60 billion for the same period. Using those raw numbers produces a cash-conversion ratio (cash from operations ÷ net income) of +10.05%. In plain terms, only about 10 cents of operating cash was generated for every dollar of reported net income in FY2024.

Further, free cash flow plunged to $44 million from $2.17 billion the prior year, a decline of -97.97%, even as capital expenditures remained moderate (capital expenditures of $519 million, about 2.31% of FY2024 revenue). The cash-flow statement also shows acquisitions(net) of -$10.26 billion and net cash used in financing activities of -$4.64 billion, including common-stock repurchases of -$1.94 billion and dividends of -$670 million in FY2024. Those items explain the large drop in cash-on-hand (cash at end period fell to $3.97B from $9.85B in FY2023) and the sharp increase in net debt.

These facts point to a clear reconciliation: the earnings line was materially boosted by non-operating or one-time accounting items (gains on disposals or non-cash adjustments), while cash flow from operations remained weak. The most salient cash-driven moves were aggressive M&A and shareholder returns. This mix reduces near-term cash flexibility and elevates scrutiny of earnings quality until operating cash conversion reaccelerates.

Balance-sheet and leverage profile: net debt and enterprise valuation#

Carrier’s year-end balance sheet shows total assets of $37.40 billion and total stockholders’ equity of $14.08 billion. Total debt sits at $12.71 billion, while cash and equivalents were $3.97 billion, producing net debt of $8.74 billion. Calculating enterprise value from the market cap and these balance-sheet items (market cap $56.55B + total debt $12.71B − cash $3.97B) yields an approximate enterprise value of $65.29B.

Using FY2024 EBITDA of $3.56 billion, the simple EV/EBITDA computed from these inputs is ~18.33x (65.29 ÷ 3.56). That is higher than some reported trailing multiples in the dataset (which reference different EBITDA definitions or TTM adjustments), but the takeaway is consistent: Carrier currently carries a mid- to high-teens EV/EBITDA multiple on FY2024 statutory EBITDA.

Debt-to-equity computed from year-end totals is roughly 0.90x (total debt $12.71B ÷ equity $14.08B = 90.29%), while the dataset’s TTM debt-to-equity ratio (~80.83%) reflects different timing and denominator conventions. Importantly, net-debt-to-EBITDA using FY numbers is about 2.45x (8.74 ÷ 3.56), a level that is manageable by industrial-capex standards but elevated relative to Carrier’s historical posture and to pre-acquisition years.

Table 2 summarizes the balance-sheet and cash-flow trend that underlies these leverage calculations.

(The acquisition line captures net cash for M&A in the period; values are taken from the company cash-flow schedules.)

In short, the balance sheet is intact but materially affected by M&A activity and buybacks in FY2024, which compressed liquidity and pushed net leverage higher even as headline profitability improved.

Strategy and execution: data-center cooling, aftermarket services and targeted automation M&A#

Carrier’s strategic narrative — pivoting toward data-center cooling, recurring aftermarket services, and building automation — is visible in both the operating performance and recent transactions. Management has emphasized that data-center cooling is on track to reach about $1 billion in revenue in 2025 and that aftermarket growth is running at double digits in recent quarters, both of which increase revenue quality and margins. Those segment shifts help explain the FY upward trend in gross profit and a meaningful rebound in operating leverage.

Execution of that strategy has included targeted tuck-in acquisitions to bolster Automated Logic’s building-automation footprint. Carrier announced acquisitions such as Blaich Automation GmbH (Germany) and Control Solutions, Ltd. (Canada), which expand local service capability and recurring-revenue potential in strategic commercial markets. The cash-flow statement’s -10.26B acquisitions item for FY2024 shows management is actively deploying capital into inorganic growth and platform-building.

The near-term effect of these deals is twofold. First, they accelerate access to higher-margin recurring-service revenue and deepen technical capabilities for integrated HVAC-plus-controls solutions. Second, they create short-term pressure on free cash flow and net debt as the company pays for scale. The strategic choice — buy growth and capability now while compressing cash metrics — is coherent, but its success depends on integration execution and the ability to convert added revenue into cash quickly.

Capital allocation: returns and the cost of buying growth#

Carrier returned capital in FY2024 through $1.94B of share repurchases and $670M of dividends, even while making large acquisitions and allowing cash balances to fall. That mix — heavy deal activity alongside continued buybacks — tells a clear capital-allocation preference: management is prioritizing share-count reduction and portfolio transformation in parallel.

From a capital-allocation lens, the critical questions are whether the acquired assets will deliver a return on invested capital materially above the company’s weighted average cost of capital and how long cash conversion will lag while acquisition-related working capital and integration costs are absorbed. With FY2024 reported ROE (calculated from fiscal net income ÷ year-end equity) at about 39.77% (5.60 ÷ 14.08), the accounting return looks strong. However, that accounting ROE is influenced by one-time items and does not reflect the weak free cash flow; investors should therefore place heavier weight on cash-based ROIC as integration plays out.

Market reaction, valuation context and peer comparisons#

The market has been mixed in its response to these developments. Short-term investor focus on residential HVAC softness and geographic variability (notably pockets of softness in the U.S. and China) has pressured sentiment at times, even when the company reported margin expansion and segment improvement. On a multiples basis, computed EV/EBITDA using FY2024 statutory EBITDA is about 18.33x, while TTM and forward multiples in some datasets show mid-teens to high-teens ranges depending on adjusted EBITDA and analyst estimates. That multiple places Carrier in the same valuation neighborhood as many industrial/controls peers, albeit with a discount when adjusted growth prospects are compared to higher-rated competitors that have steadier cash conversion.

Two important technical points explain apparent valuation discrepancies in public data. First, trailing P/E ratios differ depending on which EPS series is used. The market-quote P/E of ~38.19x reflects GAAP trailing EPS of $1.74 (66.46 ÷ 1.74), while an adjusted TTM EPS figure of $5.13 (dataset’s netIncomePerShareTTM) produces a much lower adjusted P/E. Second, announced forward multiples (2025–2029 forward PE and EV/EBITDA schedules in the dataset) embed analyst expectations of the margin and growth improvements management targets. Investors must therefore be precise about which earnings definition they use when comparing multiples.

What this means for investors#

Carrier’s FY2024 results present a classic strategic tradeoff: the company is deliberately reshaping its mix toward higher-margin, less cyclical businesses while simultaneously using cash to buy capabilities and return capital. That approach produces three practical implications for investors.

First, headline profitability has improved, driven by mix, pricing and productivity actions. The FY revenue growth of +18.68% and gross-profit gains validate the argument that data-center cooling and aftermarket services are contributing materially to growth. If management executes on converting those revenue streams into recurring cash, Carrier’s operating profile will materially improve.

Second, earnings quality and cash generation are the immediate watch items. The dramatic divergence between reported net income ($5.60B) and operating cash from continuing operations ($0.56B) implies that investors must prioritize cash-based metrics when assessing sustainability. Watch the next two quarterly operating-cash prints and acquisition-related working-capital effects closely; until operating cash conversion recovers, leverage and liquidity will remain focal points.

Third, capital allocation is active and decisive, not neutral. Management deployed ~$10.26B in acquisitions in FY2024 while continuing buybacks and dividends. Those are intentional choices that can pay off if the acquisitions scale recurring margins and integration costs are controlled. However, they also reduce short-term financial flexibility and increase dependence on post-integration cash conversion to fund future returns.

Key takeaways and forward signal points#

Carrier’s FY2024 story can be summarized in three concise, data-rooted takeaways. First, growth and margin improvement are real: FY revenue $22.49B (+18.68%) and gross-profit expansion support the strategic shift to commercial and services businesses. Second, earnings quality needs verification: the firm’s cash conversion of ~10.05% for FY2024 (operating cash ÷ reported net income) and free cash flow near $44M reveal that reported profit growth has not yet fully translated into free cash flow. Third, balance-sheet flexibility has been reduced by M&A and buybacks: net debt rose to $8.74B and EV/EBITDA (on FY EBITDA) computes to ~18.33x, leaving less margin for error should macro or regional demand soften.

Watch the following forward signals as the ledger for proof of concept: quarterly operating-cash recovery versus the current trough; integration KPIs and recurring-service contract retention from recent acquisitions; and management commentary on buyback cadence if cash conversion lags. If operating cash flow and free cash flow normalize toward historical mid-single-digit percentage points of revenue, the strategic M&A and margin improvement story will be validated. If cash conversion remains depressed, the valuation multiple will likely reflect persistent execution risk.

Sources and data notes#

All financial figures used are taken from Carrier’s published fiscal statements and the dataset provided. Quarter- and segment-level commentary (data-center ramp, aftermarket growth, and recent acquisitions) are taken from Carrier’s public releases and contemporaneous reporting (Carrier corporate releases and market coverage). Specific press releases on acquisitions are available on Carrier’s investor site: Carrier press release — Blaich Automation acquisition and Carrier press release — Control Solutions, Ltd. acquisition. Market reaction and comparative commentary cited from Reuters and Bloomberg are available in the public press coverage (see Reuters and Bloomberg items in company sources).

Conclusion#

Carrier’s FY2024 delivers a mixed but directional picture: structural revenue and margin improvement driven by data-center, commercial and services growth are clear and meaningful, but the conversion of those gains into cash lags materially after an aggressive year of M&A and shareholder returns. For stakeholders, the immediate priority is cash conversion and integration execution: the strategic playbook is coherent and the elements are in place, but the financial proof will be in sustainable operating cash flow and a return of balance-sheet optionality.

Key metrics to monitor in coming quarters include operating cash flow, free cash flow recovery, net-debt-to-EBITDA progression, and recurring revenue growth from acquired building-automation assets. Those are the concrete metrics that will determine whether Carrier’s recent moves are a durable re-rating story or a profitable accounting inflection with delayed cash realization.