The German Federal Minister of Economics, Robert Habeck, is stirring things up these days. Gas and oil heating systems are to be banned from next year, and climate-friendly energy is to be promoted in their place. For critics, the costs are too high; for supporters, on the other hand, it can't happen fast enough. While some are still debating, the U.S. company Carrier Global is creating facts: The air conditioning technology group, which has also been active in the heat pump market for years, is taking over large parts of the German industry leader Viessmann for EUR 12 billion. This is a clever move, as the market for heat pumps in Europe is forecast to triple to EUR 15 billion by 2027.
With the acquisition, Carrier Global rises to become a leader in the promising segment. The sunny Florida-based company is no stranger to Europe. For example, Carrier acquired the refrigeration division of Germany's Linde AG in 2004. And with this latest acquisition, the company is continuing to live up to its "Global" name. "The acquisition of Viessmann is a groundbreaking opportunity," CEO David Gitlin says of the deal, adding, "Climate change, sustainability requirements and geopolitical factors are driving an unprecedented energy transition in Europe."
But the deal is also in full swing in the United States. According to climate change researcher Alexander Gard Murray, the share of heat pumps in new construction increased from less than a quarter at the start of the millennium to 40% now overseas. Supported by government incentives for a new energy future, the trend is likely to continue. "If you look at the Inflation Reduction Act, you can see in it a huge opportunity for both companies to combine their strengths," Max Viessmann explained the outlook in an interview with CNBC. Viessmann's business is expected to grow at a double-digit percentage rate through 2030. As a result, Carrier's revenue growth is also expected to increase by more than 100 basis points.
The acquisition is part of Carrier Global's new strategy to realign its portfolio. For example, the company plans to divest its Fire & Security and Commercial Refrigeration businesses in the coming year. The money from the planned sales is to be used to reduce debt on the one hand and to buy back the corresponding shares issued to the Viessmann family on the other.
Even without the Germans, Carrier has recently been in good shape. In the first quarter, sales increased by 13% to USD 5.3 billion. Net income declined, but there was a special effect in the year-ago quarter. With earnings per share of USD 0.52, analysts' expectations were exceeded by almost a tenth. For the full year, the company expects to achieve a profit of between USD 2.50 and 2.60. In the middle range, this would correspond to an increase of 9%. The adjusted operating margin is still seen at 14%. Analyst consensus expects average annual profit growth of about one-tenth through 2024.
On the capital market, Carrier is in a pronounced sideways trend. Although the stock has posted a proud 145% gain over a 3-year period, the upward trend is a long time ago. For more than 12 months, the share has been trading in the USD 40 range. The latest quarterly report and the announcement of the Viessmann takeover did nothing to change this. Investors are waiting for the time being, especially as the deal is not yet completely in the bag. Economics Minister Habeck has announced his intention to scrutinize the purchase.
The new Softcallable Barrier Reverse Convertibles are perfectly suited to the current situation. They enable attractive returns even when prices are stagnating. And this despite the fact that the products come with conditional partial protection. With a maximum term of 15 months - the first softcall observation day takes place after half a year - the BRC on CHF basis holds a coupon of 9.00% p.a. With the USD version, a maximum interest rate of 12% p.a. is possible. In order to achieve the maximum yield, the carrier share may even reset moderately. It is important that the underlying does not touch the barrier at 65% of the initial level. This threshold is roughly at the mid-2020 price level.
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