DCF Studio

    CARR · NYQ · Industrials

    Carrier Global Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 27.06

    Market price

    USD 53.88

    Implied upside

    -49.8%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Value Per Share

    Perpetuity growth
    USD 27.06-49.8%
    Exit multiple
    USD 60.98+13.2%
    Market price
    USD 53.88

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn4bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 23.5bnUSD 25.3bnUSD 27.4bnUSD 29.5bnUSD 31.9bn+7.9%
    EBITUSD 2.3bnUSD 2.5bnUSD 2.7bnUSD 3.0bnUSD 3.2bn+7.9%
    NOPATUSD 1.9bnUSD 2.0bnUSD 2.2bnUSD 2.3bnUSD 2.5bn+7.9%
    Add depreciation & amortisationUSD 928.8mUSD 1.0bnUSD 1.1bnUSD 1.2bnUSD 1.3bn+7.9%
    Less capital expenditureUSD -484.8mUSD -523.4mUSD -565.0mUSD -609.9mUSD -658.3m+7.9%
    Less increase in working capitalUSD 522.9mUSD 564.4mUSD 609.3mUSD 657.7mUSD 710.0m-7.9%
    Free cashflow to firmUSD 2.8bnUSD 3.0bnUSD 3.3bnUSD 3.5bnUSD 3.8bn+7.9%
    Discount factor0.95370.86750.78900.71770.6528-
    Present valueUSD 2.7bnUSD 2.6bnUSD 2.6bnUSD 2.5bnUSD 2.5bn-1.8%
    Present Value Of The ForecastUSD 13.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.200Reported 1.298, pulled toward 1.0 (Blume)
    Cost of equity11.60%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 44.4bn78.4% of capital
    Total debtUSD 12.3bn21.6% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.94%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 27.06

    62% of EV

    Forecast FCFF, final year
    USD 3.8bn
    Capex at depreciation, working capital in reinvestment
    USD 3.1bn
    Less reinvestment at g/ROIC (25.1% of NOPAT)
    USD -786.7m
    Capitalised
    USD 2.3bn
    ROIC (WACC floor)
    9.9%
    Terminal value, undiscounted
    USD 32.3bn
    Terminal value, discounted
    USD 21.1bn
    Enterprise value
    USD 34.0bn
    Less net debt
    USD 10.7bn
    Equity value
    USD 23.3bn

    Exit at 17.3x EBITDA

    Value per shareUSD 60.98

    79% of EV

    Terminal value, undiscounted
    USD 77.1bn
    Terminal value, discounted
    USD 50.3bn
    Enterprise value
    USD 63.3bn
    Less net debt
    USD 10.7bn
    Equity value
    USD 52.6bn

    Spread between methods: 77%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.94%36.2136.3736.5436.7036.86
    8.94%30.9931.1331.2731.4131.54
    9.94%26.8226.9427.0627.1727.29
    10.94%23.4023.5023.6123.7123.82
    11.94%20.5520.6420.7320.8320.92

    Outlined: this model. Green text: above today's price of 53.88. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year7.9%19.7%+11.7pp
    EBIT margin10.0%19.1%+9.1pp
    Discount rate9.9%6.1%-3.9pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.