The two are well established large cap companies, very similar to Otis, though Otis has the biggest worldwide market share currently. Otis recorded sales of $13.1 billion in FY19.Carrier is a leading global provider of innovative HVAC, refrigeration, fire, security, and building automation technologies.
Supported by the iconic Carrier name, the company’s portfolio includes industry-leading brands such as Automated Logic, Carrier Transicold, Edwards, GST, Kidde, LenelS2 and Marioff. The companies are also expected to have significant revenue synergy opportunities from the technologies. The life cycle of an elevator is about 25 years. This article is written by Rich Howe, CFA, who monitors the stock spin-off market at www.stockspinoffinvesting.com. Urbanization, climate change, increasing requirements for food safety, rising standards of living, and needs for increasing energy conservation are all trends that support demand for Carrier products and services. (See Otis stock analysis on TipRanks) Carrier Global Corporation ( CARR ) United Tech’s last spinoff is Carrier Global Corp. Carrier has the highest risk/return of the bunch.
For every share of UTC common stock, UTC shareowners will receive one share of Carrier common stock and one-half share of Otis common stock. Management expects these trends to continue.The third strategic initiative is to advance digitization in the company. It comprises four industry-leading businesses – Collins Aerospace Systems, Pratt & Whitney, Raytheon Intelligence & Space and Raytheon Missiles & Defense.
The third leg of its strategy is to expand their service business and to embrace digital innovation.
Otis Worldwide Corporation (NYSE: OTIS) Board of Directors today declared a quarterly dividend of $0.20 per share of Otis' common stock. Given its cyclical nature, we expect the company to face significant headwinds in 2020.Carrier’s peers (Trane, Johnson Controls, IR, LII) trade at a median EV/2020 EBITDA multiple of 15.8x and a median price to earnings multiple of 23.7x. However, 80% of profit comes from Service.
Discounted cash flow analysis also supports this valuation.Management believes these strategic initiatives will enable Otis to grow sales over time at a low to mid single digit rate while expanding operating margins by 20-30bps per year.Carrier’s basic focus is to accelerate top-line growth.The first leg of the strategy will be to grow the base. Both of these evidence the commitment to new equipment growth.The fourth strategic initiative is to focus and empower the organization. The Otis brand is recognized across the globe, and our products are installed in some of the world’s most recognizable buildings.
Since 2014, Otis has increased its number of patents by over 200%. In addition to new equipment, Otis provides modernization products to upgrade elevators and escalators as well as maintenance and repair services for both its products and those of other manufacturers. Recently, United Technologies (UTX) broke up into three independent public companies. More than 28,000 devices have been deployed so far with digital capability. The company expects that the issued trading for Carrier’s and Otis’ respective common stocks will begin on March 18th, 2020 under the symbol CARR-WI for Carrier and OTIS-WI for Otis. For FY19, the business delivered a subdued performance and we expect the business to have slightly lower revenue and EBIT growth over the next two years.Carrier business provides heating, ventilating, air conditioning (HVAC), refrigeration, fire, security, and building automation products, solutions, and services for residential, commercial, industrial, and transportation applications.
Revenue declined 21% during the Great Financial crisis while operating income declined 34%. Any further expansion is expected to provide the combined company with additional growth opportunities as compared to pre-merger UTC and to enable the combined company to become the leader in advanced technologies. Write to Andrew Bary at andrew.bary@barrons.com Close