Is Carrier Stock a Buy?

Life hasn't started out easy for heating, ventilation, air conditioning and refrigeration (HVACR) and fire security company Carrier (NYSE: CARR) since it became a publicly traded company in early April. The company's spin out from the former United Technologies was supposed to usher in a period of change -- the expectation being that management would be unleashed in order to fully realize the potential in Carrier's portfolio. Unfortunately, the COVID-19 pandemic had other ideas, and the company has immediately faced headwinds. Let's take a look at the investment case for the stock as it stands now.

Putting valuation aside for the moment, there are probably two key arguments for the underlying investment case in the industrial stock :

On the first point, Carrier's plan is to cut costs by $600 million by 2022 -- the so-called Carrier 600 plan -- with around 55% of it coming from reducing supply chain costs by consolidating suppliers. The rest will come from cutting factory costs by increasing automated production, and improving productivity of general and administrative work. Given that adjusted operating profit was just $2.6 billion in 2019, the cost reduction plans look significant.