Carrier reports strong earnings, CEO says company will be 'epicenter for cold chain data'

Carrier Global Corporation CEO David Gitlin joins Yahoo Finance to discuss the appliance company's latest earnings report, and its ambitions heading into Q4.

Video transcript

AKIKO FUJITA: Welcome back to Yahoo Finance Live. Carrier surpassing Q3 estimates in its most recent quarter. Their revenue coming in at $5.3 billion, earning $0.71 a share. I want to bring in the CEO of Carrier, David Gitlin joining us today, along with Yahoo Finance's Brian Sozzi. And David, it's good to talk to you today. Certainly, a very strong quarter for the company. Talk to me about what really you think was the big driver in the performance for the quarter.

DAVID GITLIN: Well, Akiko, it's really driven by demand. We're seeing strong demand really across the portfolio. You know, you step back and you look at this year for us. We came into the year thinking growth would be 5% year over year. We just raised our full year guidance to having organic growth of 13%. And it's really because we are in the middle of major secular trends, more spending on sustainability, more spending on healthy, safe indoor environments, more spending on COVID and safe food distribution.

So we're in the middle of key secular trends. The team is executing well to keep up with it, albeit higher input costs that we have to manage. But the good news is demand is strong globally. We're supporting our customers generally with this increased demand. And now we just have to manage the supply chain challenges.

BRIAN SOZZI: Dave, what's your outlook for margins next year? Some pressure in this most recent quarter, but if you are pushing through price increases to offset this inflation, I mean, do those margins expand, looking out over the next 12 months?

DAVID GITLIN: Yeah, you know, you look at this year. Our margins will be up 70 bips. And we'll get into the details of next year as we get into early next year with our investors. But what we have said when people think about Carrier is consistent 5% top line growth, 50 bips of margin expansion per year, and we're going to continue to have cash flow equal to net income. So, clearly, if all you're having is price offset costs, that would give you margin headwind.

So the challenge for our team is to make sure that we have price cost positive. What that means for us and I think the good news is, we're going into next year now with eyes wide open. We actually chased a lot of the price inflationary pressures this year. Going into next year, we're going to be very aggressive in the last two months of this year on the price side and on the cost side to set ourselves up for positivity next year.

BRIAN SOZZI: You think this quarter, Dave, was peak inflation for a Carrier?

DAVID GITLIN: It's hard to say because we keep seeing some of-- even the tier one, tier two pressures keep there. We continue to see logistics costs are high, commodity pricing. So we are managing it, I think, like a lot of other companies, being aggressive on the controllables. But I think a lot of the underlying issues with things like chip shortages do remain into next year. Our job is to stay out in front of it.

ZACK GUZMAN: Yeah, when we talk about growth drivers here, too, we talked a lot about vaccine cold chain and things like that. I mean, how-- what does that look like in terms of building this out and continuing it? Granted, I know it's a little bit hard to project some of this stuff, but how is the company looking at it?

DAVID GITLIN: I think what COVID did is shine a light on the criticality of safe vaccine distribution globally. In places like India, Africa, and many parts of the world, there really is no cold chain infrastructure to deal with massive vaccination distribution. So I think this is going to be a recurring theme for us to come. We just started over the last 12 months. One of our businesses, our Sensitech tech business, does cargo monitoring, is very active in cold chain. Their sales were yet again up in the 20% range. So we're just at the beginning phases.

Our job and what we're really focused on with our partnership with AWS, we launched a new platform that we call Links. And that's connecting the dots between all the different handoffs that take place in any kind of cold chain distribution. We want to be at the epicenter of one-stop-shop for cold chain data and cold chain distribution globally.

BRIAN SOZZI: And Dave, we're starting to see a lot of companies go back to their office in some form. What has that meant for your air filtration business?

DAVID GITLIN: It's exciting. It's very encouraging, because another light that COVID has shined on, on the possibilities is making sure that people have healthy and safe indoor environments. So we're seeing a lot of demand as people start to think about not only how do I provide a safe indoor environment, but how do I give my customers confidence that I have a safe and healthy indoor environment?

If you were to go to the Braves game this weekend and you go into some of the indoor areas, you would see a dashboard that tells you that it has safe indoor air quality. We've partnered with the Braves. You see it in Truist Park. And that gives fans confidence as they come back indoors that you have the right CO2 levels. The particulate matter levels are OK, radon and so on. And what the Braves have done is that when they see there's issues, they go and attack them.

So it's information that ties into the control systems, and it actually helps autocorrect any deficiencies that's inside. It's great tailwind for our light commercial business, which was up significantly. That's K through 12. That's the retail space. That's restaurants. It's been-- orders in the commercial HVAC side have been very strong, in part because of the secular tailwind.

AKIKO FUJITA: David Gitlin, Carrier CEO, it's great to have you on the show today. And our thanks to Brian Sozzi as well for joining in on the conversation.