10-Q: Carrier Global Corp Q2 2026 Earnings: Sales Up, Profit Down

Carrier Global Corporation reported a 4% increase in net sales for the second quarter of 2026, reaching $6.4 billion, but saw a 15% decrease in net earnings attributable to common shareholders, falling to $501 million.

Summary

• Carrier Global Corporation reported net sales of $6.351 billion for the three months ended June 30, 2026, a 4% increase from $6.113 billion in the same period of 2025.
• Net earnings attributable to common shareowners decreased by 15% to $501 million for the quarter, compared to $591 million in the prior year.
• For the six months ended June 30, 2026, net sales increased by 3% to $11.692 billion, while net earnings attributable to common shareowners decreased by 26% to $739 million.
• The company experienced a decrease in gross margin as a percentage of net sales, down to 27.2% for the quarter from 28.9% in the prior year, attributed to higher input costs and unfavorable business mix.
• Operating expenses increased by 4% for the quarter, driven by higher investment spending and incentive compensation costs, partially offset by cost reduction initiatives.
• The Climate Solutions Americas segment saw a 4% increase in net sales but a 6% decrease in segment operating profit.
• The Climate Solutions Europe segment reported a 6% increase in net sales and a 4% decrease in segment operating profit.
• The Climate Solutions Asia Pacific, Middle East & Africa segment had a 4% increase in net sales but a significant 20% decrease in segment operating profit.
• The Climate Solutions Transportation segment reported a 2% increase in net sales and an 8% decrease in segment operating profit.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to the significant decrease in net earnings and segment operating profits, despite modest sales growth, indicating margin pressures and operational challenges.

Positives

• Net sales increased by 4% to $6.351 billion for the three months ended June 30, 2026.
• Organic sales increased by 3% for the three months ended June 30, 2026, driven by improved end-market demand in Climate Solutions Americas, Europe, and Asia Pacific.
• The company continues to focus on productivity initiatives, which partially offset increased costs.
• The Climate Solutions Americas segment saw a 4% increase in net sales, driven by volume growth in residential and light commercial businesses.
• The Climate Solutions Europe segment experienced a 6% increase in net sales, with growth in residential and light commercial businesses.
• The Climate Solutions Asia Pacific, Middle East & Africa segment reported a 4% increase in net sales.
• The Climate Solutions Transportation segment saw a 2% increase in net sales, with strong performance in container refrigeration.
• The company has approximately $4.6 billion remaining under its share repurchase authorization.

Negatives

• Net earnings attributable to common shareowners decreased by 15% to $501 million for the three months ended June 30, 2026.
• Gross margin as a percentage of net sales decreased by 170 basis points to 27.2% for the quarter, due to higher input costs and unfavorable business mix.
• Segment operating profit for Climate Solutions Americas decreased by 6% to $823 million.
• Segment operating profit for Climate Solutions Europe decreased by 4% to $95 million.
• Segment operating profit for Climate Solutions Asia Pacific, Middle East & Africa decreased by 20% to $108 million.
• Segment operating profit for Climate Solutions Transportation decreased by 8% to $118 million.
• The company recorded a $46 million impairment charge related to its Riello business.
• Interest expense increased by 10% to $126 million for the quarter due to higher commercial paper borrowings.

Risks

• The effect of economic conditions in the U.S. and globally, including financial market conditions, inflationary cost pressures, commodity price volatility, interest rates, and foreign currency exchange rates.
• Challenges in the development, production, delivery, support, performance, and realization of anticipated benefits of advanced technologies and new products and services.
• Future levels of capital spending and research and development spending.
• Future availability of credit and factors affecting such availability, including credit market conditions and the company's capital structure and credit ratings.
• Delays and disruption in the delivery of materials and services from suppliers.
• The outcome of legal proceedings, investigations, and other contingencies, including the ongoing Aqueous Film Forming Foam (AFFF) litigation and antitrust lawsuits.
• The effect of uncertainty and/or changes in political conditions and U.S. trade policies, including tariffs.
• The ability of Carrier to retain and hire key personnel.

Future Outlook

The company anticipates creating long-term shareowner value by investing strategically to strengthen its product position in homes, buildings, and across the cold chain to drive profitable growth. It believes its business segments are well-positioned to benefit from favorable secular trends including urbanization, population growth, food security, electrification, and digitalization. The company continues to monitor developments in U.S. tariff policy and assess the impact of any changes on its business.

Management Comments

• "Through our performance-driven culture, we anticipate creating long-term shareowner value by investing strategically to strengthen our product position in homes, buildings and across the cold chain in order to drive profitable growth."
• "We believe our business segments are well positioned to benefit from favorable secular trends, including the mega-trends of urbanization, population growth and demographic shifts, food security and safety, electrification, increasing demand for climate control and accelerated digitalization."
• "Through a combination of supplychain adjustments, productivity initiatives and pricing actions, we fully mitigated the 2025 impact of tariffs implemented in 2025."
• "To date, neither the IEEPA tariffs implemented during 2025 nor the Section 232 tariffs have had a material impact on our business, and we will continue to monitor developments in U.S. tariff policy and assess the impact of any changes on our business."

Industry Context

StockSavvy.ai notes that Carrier Global Corporation's performance in Q2 2026 reflects broader industry trends in climate and energy solutions, with increased demand driven by urbanization and digitalization. However, the reported decline in profitability, despite sales growth, highlights the persistent challenges of input cost inflation and supply chain pressures impacting the HVAC and refrigeration sectors globally.

Comparison to Industry Standards

• The decline in gross margin percentage from 28.9% to 27.2% for the quarter is a concern, as many competitors in the HVAC and climate solutions space have focused on maintaining or improving gross margins through pricing power and operational efficiencies.
• While Carrier's net sales growth of 4% is positive, it lags behind some competitors who have reported higher organic growth rates in specific segments like residential or commercial HVAC, potentially indicating market share shifts.
• The significant decrease in net earnings, particularly in segments like Asia Pacific, Middle East & Africa, suggests potential underperformance relative to industry benchmarks that are showing more resilient profitability.
• The company's investment in R&D and digital solutions aligns with industry trends, but the immediate impact on profitability needs to be monitored against peers who may be seeing faster returns on similar investments.

Legal Proceedings

• The company is involved in over 18,000 lawsuits related to the historic use of Aqueous Film Forming Foam (AFFF), alleging personal injuries and property damage.
• A settlement agreement has been reached for AFFF claims, involving a $615 million cash payment over five years, net sale proceeds from KFI assets, and insurance policy recoveries.
• The company is named as a defendant in putative class-action lawsuits alleging violations of federal and state antitrust laws related to HVAC equipment pricing.
• The company has accrued for environmental remediation activities and is involved in asbestos-related litigation.
• The company has other commitments and contingent liabilities related to legal proceedings, self-insurance programs, and matters arising in the ordinary course of business.

Related Party Transactions

• The company sells products to and purchases products from unconsolidated entities accounted for under the equity method.
• Sales to equity method investees were $951 million for the three months ended June 30, 2026, and $1.637 billion for the six months ended June 30, 2026.
• Purchases from equity method investees were $59 million for the three months ended June 30, 2026, and $110 million for the six months ended June 30, 2026.
• Receivables from equity method investees were $396 million as of June 30, 2026.
• Payables to equity method investees were $31 million as of June 30, 2026.
• Two transactions occurred between Viessmann Ges.m.b.H (acquired subsidiary) and the Embassy of Iran in Austria, involving maintenance services valued at approximately $1,600.

Stakeholder Impact

• Shareholders may be impacted by the decrease in net earnings and segment operating profits, although the company continues its share repurchase program.
• Employees may be affected by restructuring costs and potential workforce reductions associated with cost-saving initiatives.
• Customers may experience impacts from pricing actions taken to mitigate inflationary pressures and supply chain costs.
• Suppliers may face challenges due to potential disruptions in the delivery of materials and services.
• Creditors' interests are considered through the company's compliance with debt covenants and its overall financial health.

Next Steps

• The company will continue to monitor developments in U.S. tariff policy and assess the impact of any changes on its business.
• The sale of the Noresco business is expected to close in the third quarter of 2026.
• The company will begin the process of seeking court approval for the Direct Claims Settlements with water providers in the third quarter of 2026.
• The company expects to receive insurance payments that will aggregate to cover the amount paid under the Proposed Settlement Agreements for AFFF litigation.

Key Dates

Recommendation

While Carrier Global Corporation reported increased net sales, the significant decline in net earnings and segment operating profits, coupled with margin compression, indicates ongoing cost pressures and operational challenges. The company's substantial share repurchase program and strategic positioning in growth markets offer some support, but the negative trend in profitability warrants a cautious 'hold' stance until margin pressures abate and profitability shows a clear recovery.

Keywords

Carrier Global, 10-Q Filing, Quarterly Report, Climate Solutions, HVAC, Refrigeration, Building Services, Financial Results