Carrier Global (NYSE:CARR) shares fell more than 2% today after BofA Securities downgraded the company to Underperform from Neutral and cut its price target to $55.00 from $62.00.
The downgrade was attributed to several factors. First, Carrier Global's valuation experienced an upward rerating after the announcement of the Viessmann acquisition.
Second, concerns arise from negative trends in the European heat pump market. These trends stem from various European countries pushing or diluting green incentives and regulations, impacting Carrier Global, especially since Viessmann generates about 40% of its revenue from heat pumps.
“There are multiple negative Euro heat pump datapoints: in Germany, heat pump applications fell 95% y/y in August. In Italy, heat pump sales declined 34% y/y in 1H23. In Poland, the heating association forecast shifted from unit sales growth of 45%y/y to (25)% y/y. All of these are potential headwinds for Viessmann,” mentioned BofA.
The bank also noted that overall construction in Europe is anticipated to experience a decline, which could potentially have an adverse effect on Viessmann's boiler business.
Lastly, the bank mentioned concerns regarding the U.S. light commercial HVAC market in the first half of 2024.