Carrier (CARR) Q3 2025: Tax Benefit Cushions Earnings Amid Sales Decline

In the world of heating, ventilation, and air conditioning (HVAC), Carrier Global Corp is a household name. But beyond keeping our homes comfortable, the company is a major player in refrigeration and fire & security solutions. To understand how this industrial giant is navigating the current economic climate, we're diving into its latest quarterly report, filed with the SEC. You can view the full 10-Q filing here.

Carrier's third quarter of 2025 presented a complex picture, marked by declining sales and operating profit, but a surprisingly stable bottom line thanks to some key financial maneuvers.

A Tale of Two Profit Figures

At first glance, the numbers show a challenging quarter. Carrier reported total net sales of $5.6 billion, a 7% decrease from the same period last year. This dip was driven by a 4% decline in organic sales (which excludes the effects of currency fluctuations, acquisitions, and divestitures) and a 4% negative impact from business portfolio changes.

This top-line pressure trickled down, causing the company's operating profit to fall by a significant 29% to $539 million. Gross margin also tightened, dropping from 28.0% to 26.0%.

To better visualize how Carrier generated its revenue and where the money went this quarter, the following flow diagram breaks down the income statement.

So, with sales and operating profit down, one might expect net earnings to follow suit. Surprisingly, net earnings attributable to common shareholders were nearly flat at $428 million, compared to $447 million in Q3 2024. How did Carrier pull this off? The answer lies below the operating profit line:

• A Major Tax Swing: The most significant factor was income tax. Carrier went from a $172 million tax expense last year to a $1 million tax benefit this quarter. This $173 million swing was the primary reason the company's net earnings held steady.
• Discontinued Operations: The company also saw a positive turn in its discontinued operations, which generated a $21 million profit this quarter, compared to a $117 million loss in the prior year.

These two items effectively cushioned the blow from the weaker operational performance, highlighting how non-operating factors can dramatically influence the final net income figure.

A Deeper Look at the Segments

Carrier's performance varied considerably across its business units:

• Climate Solutions Americas: The largest segment, covering HVAC solutions in the Americas, was the main source of weakness. It saw an 8% organic sales decline, leading to a 29% drop in segment operating profit.
• Climate Solutions Europe: While reported sales grew 4%, this was entirely due to favorable currency exchange rates. Organically, sales were down 3%, and operating profit fell 7%.
• Climate Solutions Transportation: This segment, which includes transport refrigeration for trucks and shipping containers, offers the most interesting story. Reported sales plunged 20%, but this was due to a -28% impact from divestitures. Stripping that out, organic sales actually grew a healthy 6%. More impressively, the segment's operating profit margin expanded from 14.6% to 15.4%, suggesting the remaining business is becoming more profitable.

This contrast in the Transportation segment underscores Carrier's ongoing portfolio transformation. The headline numbers are being skewed by strategic divestitures, masking underlying organic growth in the core business that remains.

Capital and Cash Flow

Carrier has been actively managing its capital. For the first nine months of 2025, the company used a substantial $2.4 billion for share repurchases and another $583 million for dividend payments. This aggressive return of capital to shareholders was a major use of cash, contributing to the cash balance falling from nearly $4.0 billion at the start of the year to $1.4 billion by the end of September. Total debt remained elevated at $11.9 billion.

In conclusion, Carrier's third quarter was a mixed bag. The core HVAC business, particularly in the Americas, faced significant headwinds. However, the company managed to protect its net earnings through a massive tax benefit. The ongoing portfolio changes, especially in the Transportation segment, are making headline numbers tricky to interpret but point towards a potentially more focused and profitable core. Investors will be closely watching whether Carrier can reignite organic growth in its larger segments and navigate the market challenges ahead.