Carrier (NYSE: CARR) may ride the upward wave of industrial stocks
For the last eight years, industrial stocks have greatly lagged technology stocks. But so far this year, it’s a different story.
The S&P 500 Industrials index has slipped 0.3% in 2025, far less than the 9.9% drop for the tech-heavy Nasdaq Composite index. One industrial stock that has struggled so far this year but may have a brighter future is Carrier Global (NYSE: CARR).
It provides heating, ventilation, air conditioning (HVAC) and refrigeration products. Carrier’s shares have slid 7% year to date, despite strong fourth-quarter earnings, but have risen 10% in the past year and 38% over the past three years combined.
As for earnings, Carrier posted 6% organic revenue growth in the fourth quarter, and adjusted operating margin rose 3.7 percentage points to 13.2%.
Tidying up the balance sheet
One factor helping the company is steps it took to clean up its debt-laden balance sheet after being spun off from United Technologies in 2020. Since then it has dumped fire, security and refrigeration businesses in several transactions, totaling $13 billion.
Carrier has narrowed its focus to HVAC and transportation refrigeration equipment and services. These businesses can grow by at least mid-single-digit percentages in coming years, estimates Morningstar analyst Brian Bernard.
The company has now switched to offense, boosting outlays for research, product development and sales. At the beginning of last year, it bought German heat-pump and boiler maker Viessmann for 12 billion euros ($13.2 billion).
Viessmann fell short of Carrier’s sales goals in 2024. But the German unit could benefit this year from a continuation of government subsidies for heat pumps, notes Barron’s Jacob Sonenshine. “This business has the potential to grow fast because the products are energy-efficient.”
The onshoring trend of US companies shifting their manufacturing plants from overseas back to their homeland also is helping Carrier, because it can provide HVAC products for the new facilities.
Data center growth
The boom in data-center building amid artificial intelligence mania also is boosting Carrier. As of August, the amount of data center supply under construction in North America’s top markets totaled a record 3.9 gigawatts, up about 70% from a year earlier, according to real estate firm CBRE.
And the trend may well continue. Global demand for data center capacity could rise at a rate of 19%-22% annually from 2023 to 2030, says consulting firm McKinsey. Carrier, of course, can provide its HVAC products to the new data centers.
To be sure, AI mania is cooling a bit, as are some expectations for data center growth. In the last six months, Microsoft (NASDAQ: MSFT) ditched data center projects slotted for 2 gigawatts of electricity in the US and Europe amid concerns of oversupply, according to TD Cowen analysts. But solid growth still seems likely for data centers.
The overall outlook for Carrier is strong, analysts say. “Its proven engineering and technological expertise and service capabilities are key differentiators,” making the company a market leader in commercial building systems and transportation refrigeration products, says Morningstar’s Bernard.
However, keep in mind that there’s no guarantee Carrier stock will keep rising. For example, while economists don’t see recession as the base case, they see an increased probability that one will occur. And when recessions hit, industrial stocks generally get hit too.
