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<p>Carrier, the HVAC and refrigeration giant, has remade its $22 billion business around shrinking the energy footprint of heating and cooling. It estimates that since 2020, its products have helped users avoid 490 million metric tons of greenhouse-gas emissions—the equivalent of the annual energy use of 65 million U.S. homes.</p>

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CTW 2021-49 Carrier

<span style="font-weight: 400">When COVID-19 sparked demand for better air filtration, Carrier was poised to help. Healthy-building tech is a central focus for the HVAC-systems maker. Among the products it introduced: Portable equipment designed to contain and remove air potentially contaminated by viral particles—giving health care providers the means to turn any space into an infectious disease isolation room.</span>

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-171-Carrier Global

This Florida-based corporation keeps its customers acclimated with its heating, air conditioning, and refrigeration services.

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Carrier Global is the largest heating, ventilation, air conditioning (HVAC) and refrigeration company in North America, serving customers in over 160 countries. The refrigeration segment offers products and services for trucks, trailers, shipping containers, and rail applications. In 2024, the company announced it had acquired renewable HVAC provider Viessmann Climate Solutions for $18 billion. Willis Carrier, the inventor of modern air conditioning, founded the company in 1915. United Technologies acquired Carrier in 1979 before the company was spun off in 2020.

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Carrier Global (CARR): Company Profile, Stock Price, News, Rankings

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Carrier Global

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Good morning, and welcome to Carrier's second quarter 2026 earnings conference call. On the call with me today are David Gitlin, Chairman and Chief Executive Officer, and Patrick Goris, Chief Financial Officer. Except where otherwise noted, the company will speak to results from continuing operations, excluding restructuring costs and certain significant non-recurring items. A reconciliation of these and other non-GAAP financial measures can be found in the appendix of the webcast. We also remind listeners that the presentation contains forward-looking statements which are subject to risks and uncertainties. Carrier's SEC filings, including our Form 10-K and quarterly reports on Form 10-Q, provide details on important factors that could cause actual results to differ materially. With that, I'd like to turn the call over to Dave. 

Thanks, Mike, and good morning, everyone. With strong orders, record backlog levels, and first half results being better than expected, we are raising our full year guidance on sales, operating profit, and EPS. 2Q orders were very strong, up about 40%, with Commercial HVAC up about 65%, driven by continued strength in data centers where orders were up 4x over last year. Our total company backlog, which excludes orders that we expect from long-term agreements with hyperscalers and colos, is now over $8 billion, up about 40% versus last year and up 20% sequentially. Given the increasing demand for our differentiated commercial solutions, we have announced a new facility in India and are finalizing plans for a new site here in the U.S.

We are pleased that our Resi businesses in CSA and CSE were both up high single-digits, while CSA Light Commercial was up 10%, a similar rate to the first quarter. Our strong free cash flow enabled us to continue to invest in growth, and we returned about $640 million to shareholders. We continue to remain proactive in optimizing our portfolio with the divestiture of Riello complete and the sale of NORESCO announced yesterday. In terms of acquisitions, we are excited to welcome 75F to the Carrier family as you see on slide four. This acquisition accelerates our path to creating intelligent and fully autonomous buildings. There are three primary benefits from this combination. First, 75F's BMS platform is perfectly positioned for small and medium sized businesses and for international markets. 

Because our ALC BMS offering has primarily been focused on larger building applications in the U.S., 75F expands our TAM by about $20 billion. Second, 75F will significantly enhance our BMS capabilities. It is AI enabled and cloud native which, when combined with Carrier's platforms, enables agentic AI applications for autonomy and other critical features to drive reliability, uptime, grid interaction, comfort, and energy optimization. Its wireless and auto-commissioning capabilities enable faster and seamless installations for both new applications and retrofits. Third, 75F plays an important role in our systems integration strategy, nicely complementing our equipment portfolio, Nlyte's data center infrastructure management offering, along with our digital tech stack enabled by Abound and ALC. Intelligent and autonomous buildings are the buildings of the future, and Carrier, now enhanced by 75F, is positioned to lead the way. Turning to slide five.

In 2026, we expect that nearly half of our portfolio, our Commercial HVAC and aftermarket businesses, will have their sixth year in a row of double-digit growth, and these businesses remain very well positioned for continued strong growth going forward. In addition, it is encouraging that our shorter cycle RLC businesses in North America and Europe have returned to growth. Though the timing of the recovery in global truck-trailer remains unclear, there is clearly pent-up demand as we head into 2027. With the record backlogs in our longer cycle businesses, combined with our shorter cycle RLC businesses in the Americas and Europe turning, we expect the second half to be up mid-teens and are well-positioned for strong growth to continue. On slide six. Last quarter, we walked you through our transformational commercial journey since our spin.

I am very proud that our team's strategic investments and great work are yielding such strong results. We are now increasing our full-year data center sales outlook to about $2 billion, which will be our second year in a row of doubling our sales in this important vertical. With our recent significant wins, our 2026 data center sales forecast is all in backlog, and we continue to partner with hyperscalers and colos to further strengthen our backlog for 2027 and beyond. We continue to gain market share, and the rapidly increasing install base that we are delivering today will drive attractive aftermarket growth over the long term. Turning to CSA Resi on slide seven. Bottom line is that performance has been better than we expected with our 2Q sales up 9%.

We now expect the market to be around 7 million-7.5 million units this year, largely stable versus last year. Field inventory levels continue to remain healthy, ending 2Q down about 25% versus last year. We also continue to invest in differentiation, including building out our digital ecosystem, a key priority for us, leveraging Viessmann's cutting-edge digital platform. We now have about 55,000 channel partner technicians monitoring systems real-time, up about 35% from a year ago, driving customer loyalty and channel efficiency. We are now raising our full-year expectations for CSA Resi sales to be up high single-digits. Resi sales in Europe are also improving, as you can see on slide eight. Sales were up high single-digits in 2Q with heat pumps up about 20% and boilers down high single-digits.

Market dynamics remain favorable with continued high prices for natural gas and Germany recommitting to subsidies. We also remain very encouraged by pre-order activity for our new Vitocal 200 unit. This Viessmann branded offering has all the benefits that our customers have come to expect. High efficiency, low noise, great aesthetics and connectivity, along with lower product and installation costs. It will be a tremendous secondary offering for Germany and the primary offering for most other countries in Europe. We are on track to formally launch in the fall and expect this new product to significantly increase our TAM. Though our European Commercial sales were lower than we expected in the first half, our 20% 2Q orders growth and strengthening backlog give us confidence in the second half being up mid single-digits. Segment margins in 2Q were disappointing.

We are seeing the benefit from improved volume and price costs, but that was offset by unfavorable mix and selling investments. We will continue to drive strong growth initiatives and will take a more aggressive and structured approach to cost reduction and pricing discipline. Last month, we appointed Thomas Donato as the new President of this segment. I am confident that Thomas and the team will take the right actions to get this business to mid-teen operating margins over the next few years. Moving on to aftermarket on slide nine. We remain on track for double-digit aftermarket growth. Through the first half, we are up high single-digits, and we have the playbook team and plans in place to deliver double-digit growth for the full year.

On slide 10, you see a lot more greens for our business units compared to our original guide, thus enabling us to raise our full-year outlook for sales, operating profit and EPS, and will serve us well as we head into 2027. With that, I will turn it over to Patrick. Patrick?

Thank you, Dave, and good morning, everyone. Please turn to slide 11. For the quarter, reported sales were $6.4 billion, adjusted operating profit was $1.1 billion, adjusted EPS was $0.86. Better than expected organic sales growth of 3% was driven by improving Resi and Light Commercial end markets in the Americas and Europe. Adjusted operating margin of 17.2% was a bit better than expected. The year-over-year decline largely reflects the benefit of organic growth and strong productivity, offset by unfavorable mix and increased input costs. Adjusted EPS declined 7%, driven by lower operating profit and a higher effective tax rate, partially offset by a tailwind from a lower share count. You will find a year-over-year adjusted EPS bridge on slide 20. Free cash flow of $810 million was very strong. Moving on to the segments, starting with CSA on slide 12. Organic sales for the segment increased 4%.

Dave already covered Resi and Light Commercial. With respect to Commercial, sales were down due to the timing of data center deliveries. We expect a significant sequential and year-over-year pickup in Q3. Segment operating margin of 24.4% was ahead of our guide. Compared to the prior year, the margin decline reflects stronger pricing offset by unfavorable mix and increased input costs. I will skip slide 13 as Dave already covered the main points. Turning to the CSAME segments on slide 14. Organic sales grew 4%, ahead of expectations, reflecting continued strong performance in India, Southeast Asia and Australia, with all three areas growing above 20% in the quarter. Driven by data centers, the Middle East delivered very strong sales growth of about 35%, despite a very challenging operating environment. Aftermarket continues to be strong in this region, up about 12%.

Residential and Light Commercial in China remains the main drag for the segment. As expected, segment operating margin was about 12%. Moving to the CST segment on slide 15. Organic sales were flat. The container business had another very strong quarter with sales up 40%, offsetting continued pressure in global truck trailer, which was down low-teens. The decline in segment operating margin reflects the margin differential between container and truck trailer. Turning to Q2 orders on slide 16. Total company orders in the quarter were very strong, up about 40% with growth across all segments and most businesses. Our backlog is at record levels and supports an accelerating organic growth outlook for the balance of the year. Moving on to slide 17 and shifting to our updated 2026 organic sales outlook.

We now expect full year sales to be roughly $23 billion, with organic growth up mid to high single-digits and full year data center revenue of approximately $2 billion versus $1.5 billion prior guide. We now expect CSA Resi and Light Commercial sales growth of approximately high single-digits and CSE Resi Light Commercial sales growth in the low single-digit range, compared to our prior outlook of down high single-digits and roughly flat respectively. Note that our updated outlook now reflects about $125 million year-over-year revenue headwind due to the upcoming exit of NORESCO. To summarize, we are increasing sales by over $1 billion organically versus the prior guide, with about half of that related to improved sales in CSA Resi Light Commercial, and the other half related to increased data center sales.

About $200 million of sales will drop out of our outlook versus the prior guide from the NORESCO divestiture, and relatively small changes across the other segments, which takes our sales outlook to about $23 billion for 2026. Moving on to slide 18, profit and cash guidance. We now expect adjusted operating profit of about $3.5 billion, and adjusted EPS of about $2.90, up from our prior guide of $3.4 billion and $2.80 of EPS. Second half adjusted operating profit and EPS will both be up about 50% year-over-year with strong earnings conversion. Second half earnings growth is driven by favorable volume and net productivity, partially offset by investments mix and the $0.05 headwind from the NORESCO exit and startup costs related to the new U.S. site.

No change in outlook with respect to free cash flow, as the impact of higher earnings is expected to be offset by about $100 million increase in CapEx related to the new U.S. site. We now expect full year CapEx to be about $600 million. Share repurchases are expected to remain at $1.5 billion for the year. You will find full year adjusted EPS bridges on slides 21 and 22. As usual, additional guide items are on slide 23. Finally, let me provide some color on the third quarter. We anticipate Q3 revenues to be just below $6 billion, including about a $200 million year-over-year impact from the Riello and NORESCO divestitures. Organic growth is expected to be about 10%, operating margin of about 16.5%, a 24% tax rate leading to about $0.75 of adjusted EPS.

The sequential decline in operating margin mainly reflects lower seasonal sequential Resi and Light Commercial sales in the U.S., and significantly higher Commercial sales globally. With that, operator, please open the line for questions.

We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Scott Davis with Melius Research. Your line is open. Please go ahead.

Looked like a pretty good quarter overall. Just only nit, really, is the margin decline issue. Can you go into a little bit more detail, the mix versus price/cost, the challenges that you had there? How much of that was perhaps timing? You mentioned a change in leadership, so perhaps a little bit of a different mandate as well, but maybe a little bit more detail would be helpful there.

Will do, Scott. Operating profit and margin was down versus last year. Key elements, as I mentioned, favorable volume, price, and productivity. We do have some unfavorable mix. I'll get to that in a little bit. Then, of course, there is also the timing of the tariff mitigation and lower JV income. In terms of timing of the tariff mitigation, you may recall that the tariffs went into effect early April, and the pricing associated to mitigate some of that went into effect at the end of the month. As expected, during the second quarter, the impact of tariffs and pricing associated with tariffs was a net negative. That was a headwind to our margins in the quarter. With respect to mix, within Europe, we had besides strong heat pump growth, good growth in battery and solar, which actually has quite lower margins within transportation.

Container does well but has lower margins than truck and trailer. Then within CSA, think of it as a new construction was a little bit higher mix than what we expected, which drove down overall margins. Still good margin, new construction, just not as strong as replacement. Those are some of the main elements, Scott.

Yeah. Scott, I was just going to say on the second part of your question on the leadership change, we are really excited to have Thomas Donato on board. We cannot thank Thomas Heim enough for everything he did. In terms of this next chapter, we really have to do a better job on both price and cost, to state the obvious. I think that Thomas brings great experience from his days at places like Rockwell Automation and ABB and Bosch, and we are going to be a lot more disciplined on the price side, and there is a lot of cost that we have to take out, and that includes footprint, supply chain, G&A.

Thomas and the team know that the expectation that you have of us and that we have of ourselves is certainly to get to that mid-teen profit margin, and I am confident we will get there.

Okay. Just a real quick one, guys. On the 75F, what are you buying here? Are you buying the technology? Are you buying an installed base? Is it an enhancement of your own BMS? I'm just trying to get a sense of what you're getting.

Technology, primarily. 75F has its own BMS offering. It's traditionally been targeted at the smaller and medium-sized buildings. We're buying great technology that not only enables us to attack that market here in the U.S. for small and medium-sized buildings, but it's great for an international offering. We're buying a great team. They have 91 engineers. They have a great leader, Deep, who's coming as well. We're buying talent, we're buying technology, and as I mentioned in the prepared remarks, it's really going to complement and make our ALC offering much better because it's cloud-enabled. They have agentic AI built on top of it, and it's wireless, so it's much, much quicker and easier to commission a building. If you think about the building that Patrick and Mike and I are in right now, our headquarters, there might be 1,000 sensors.

Each one needs to be individually commissioned. With their wireless capabilities and auto-commissioning, those can be all auto-commissioned without human intervention. It's a great digital tech stack that we can build on top of.

Sounds good. Okay. Congrats, guys, and best of luck the rest of the year. I'll pass it on.

Your next question comes from the line of Jeffrey Sprague with Vertical Research. Your line is open. Please go ahead.

Hey, thanks. Good morning, everyone. Hope you're well. Great to see the Resi inflecting here. Dave or Patrick, I just wonder if you could maybe just give us a little bit more color on where we're at. I guess the nature of my question is, did we see any of the two-step bullwhip effect in this quarter, or are your volumes pretty close to industry volumes this quarter? And then, your industry outlook for the year, I would assume we got some bullwhip effect in the back half of the year. Just maybe how's the movement? How's the channel? Did we see any of those machinations in Q2 here?

We didn't really see them in 2Q. We see them in the back half. We'll get 10 points of that benefit from the absence of destocking in the second half. If you think about the second half of this year, Jeff, we'll see sales up about 20% in the back half, of course, off of some relatively easy compares. 10% of that will come from the absence of destocking. We expect movement to be up mid single-digits, and then we should get price in the mid-single-digit range. We didn't see as much of it in 2Q. We get that benefit in the back half.

Dave, on the capacity, I assume it's all data center-related stuff, although, I guess the question is, are you looking at any Resi incremental capacity in the U.S., any footprint shift there? Just give us a little bit of color on the nature of the ramp. We've had a few companies that you may be seeing in the electrical space and elsewhere gagging on trying to catch up with this demand and getting capacity stood up. How do you de-risk that? What's the scope of the project? That sort of thing is the question.

We're very excited about it. If you think about our data center exit rate leaving this year for next year, it would be around $2.5 billion. When we look at our backlog and the kind of discussions we're having with the hyperscalers and colos, we just need more capacity. We're all hands on deck. We want the facility up and running by the end of the first quarter. We're primarily looking at Texas and Alabama. We hope to make a decision here in the next month or two and announce it so we can get the team rolling. We've already ordered some of our advanced lead time equipment and tooling that we're going to need for the facility. It's going to be not only both air-cooled and water-cooled chillers, some of the vertical integration with things like compressors.

If you think about the Resi side, yes, we are looking. We already have a great presence for Resi in places like Collierville, Tennessee, and Indianapolis. We are looking at expanding some of our both ducted and ductless capabilities here in the U.S. Our primary focus for this new facility, though, is all things data centers. The thing I'll say is that we have to accelerate building it for the demand that we see in 2027 and beyond. The thing that gives me confidence is that, look, we started with very low share for Commercial HVAC in the United States. Some of our peers started with much higher shares.

As we build out the product portfolio, the capacities, the number of technicians that we have in the field, we've been gaining a lot of share in the data center space, we're really well-positioned as we think about 2027, 2028, 2029. Some really nice discussions that we're having with both hyperscalers and colos. Patrick, did you want to add anything?

No, the capacity we're building goes beyond just data centers.

It can be used for other applications as well in Commercial.

Great. Good stuff. I'll leave it there. Thanks a lot, guys.

Your next question comes from the line of Nigel Coe with Wolfe Research. Your line is open. Please go ahead.

Thanks. Good morning, everyone. It's good to see the back to growth here. Patrick, hate to ask the same question each quarter, but can you maybe just provide a bit more color on 3Q? I think you said +10% organic, margins, I think 16.5%. Any color on the segments would be great.

Sounds good, Nigel. For Q3, we expect a strong pickup in sales. I mentioned about 10% organic sales growth, driven by a big step up in Commercial HVAC and data center deliveries, which will be up strong double-digit. Then Resi will be growing also because of the absence of the prior de-stocking, of course. From an operating profit point of view, favorable volume, of course, also price cost partially offset by some investments we're making. From a margin point of view, margin of 16.5% driven by strong productivity and volume leverage, partially offset by investments, of course, tariff-related pricing. We get pricing, but it's there to offset tariffs, we don't really get a margin benefit from that. It's actually slightly a margin dilutive impact. From a sequential point of view, we're going from 17.2% to 16.5%.

That's down about 70 basis points, about $400 million or so lower sales. A lot of that is, of course, because of lower Residential and Light Commercial sales and significantly higher Commercial sales. There is a big mix.

Okay. I'm just wondering if you can. Sorry. Please go ahead.

I was going to say, any color on Americas and Europe margins within 16.5%?

Yes. For the Americas will be at around 22%. Europe will be about double-digits, close to double-digits. AME, a little over 10%, mid-teens for Transportation. That gets you total company—

Okay. Just my follow-on is really I think the Americas margins, I think you're looking for sequential improvement Q over Q. Sounds like price cost tariffs have been a bit more impactful, a bit more of a drag there. Just wondering if you just maybe unpack how the Americas margin—

No, the Americas margin sequentially will drop from 24.4% that we have in Q2. I just mentioned about 22% in Q3. The biggest driver there is sequential sales down with a very large reduction sequentially in Resi Light Commercial, which is the typical seasonal reduction, about $500 million-$600 million. Then a strong pickup in Commercial sequentially. Mix clearly is a big headwind sequentially. Then investments are up slightly sequentially as well. That's the main drivers of the sequential margin reduction in CSA.

Your next question comes from the line of Joe Ritchie with Goldman Sachs. Your line is open. Please go ahead.

Could we maybe just dig into this capacity ramp a little further? Obviously, the data center market continues to grow pretty aggressively for you guys, ticking up the targets again for the year. I'm just wondering, as you think about the latent capacity you have that you're planning to build, I'm curious how far out you're going to go. What's the potential kind of revenue run rate of the new capacity? If there's any other color that you can provide on that $8 billion backlog, how much of that is coming from data center today?

Joe, I'll start and let Patrick take the second part of that question. As I mentioned, we would be able to support $2.5 billion in data centers with the capacity that we've effectively built. Remember that we've basically repurposed an entire facility to both air-cooled and water-cooled chillers that we have in North America. We've expanded Charlotte by 50%, and it's clearly not enough to support the demand that we see for 2027, 2028, 2029 and beyond. We looked at it, and said that we want to build, we want to build here in the United States. The governors in both Alabama and Texas have been very, very supportive. It's an investment that is kind of in the zone of what you would expect for a building of that size.

It's the kind of thing that it's great as part of our expansion, but we're very careful not to get out over our skis if data center CapEx were to slow down the road. Because number one is that for someone like us, we would need to go from 10% to maintain share in the range of, say, 15%-20%, which we can and will do, versus others that may have started at 30%, if the overall volume slows, they would have to get share to something like 45%. We feel good about the investments we're making. We're trying to be very purposeful to make sure that our lines that we're setting up and that our product portfolio is as fungible as possible to non-data center applications.

I'm really proud that the kind of LTAs that we're establishing with both hyperscalers and some of the major colos give us tremendous contractual confidence in the kind of volume that we're going to see over these coming years. Patrick, in terms of the backlog?

Joe, our backlog, as I mentioned, it's actually north of $8 billion. Commercial backlog is about two-thirds, 70% of that, and 40% of that is data centers.

Got it. That's helpful, Patrick. Just the one quick follow-up there. You mentioned the Data center delivery impact in 2Q. I'm just curious of that $2 billion that you're now expecting for this year, how much came through in the first half versus the second half? Just basically trying to understand what the impact was in 2Q as well.

Yeah. Joe, in the first half we saw about $500 million. Of the $2 billion, $1.5 billion is the balance of the year, with the huge ramp-up in the second half, starting now.

Your next question comes from the line of Alexander Virgo with Evercore ISI. Your line is open. Please go ahead.

Yeah, thanks very much. Gents, good morning. I wondered if you could just help us a little bit with the margin dilution point, I guess. I just wonder if you can give us a sense of how much the impact was the investment in the quarter. Presumably that's going to be a much bigger impact in the second half. I guess as we extend that into 2027. I'm just trying to get a sense for the moving parts on margins as Commercial dilutes and Resi is obviously accretive. The sequential point I get, Patrick, so that's fair enough. As we look at Q4 and then into 2027, that'd be super helpful. Thank you.

Okay. Well, let me first maybe go and say, compared to the new guide for the full year, as I mentioned, our operating profit and adjusted EPS are about 50% year-over-year with strong earnings conversion. Compared to the prior guide, we're raising $1 billion in sales and $0.10 of EPS. The reason why there is not a stronger, bigger fall through is the investments that I mentioned. These are this year, they will be roughly in the $100 million range. I mentioned earlier, I thought the timing on the April 6th tariff change mitigation. I talked about that earlier when Scott asked the question. That's a timing point of view, we'd expect that to be a headwind next year.

The one-off items that should not repeat, which is the $0.05 related to the NORESCO exits and the new U.S. facility. I do not expect next year to have an incremental, one-time set of investments related to data centers on top of the $0.05 that we're referring to now for the new site and the investments for the new facility. Going forward, of course, the margin will all depend on what's the mix of Resi versus Commercial. If both of them grow at a similar rate, I would expect this to remain in the 25%-30% conversion for the total company.

Your next question comes from the line of Andy Kaplowitz with Citigroup. Your line is open. Please go ahead.

Dave or Patrick, in CSE, maybe just an update on Viessmann. You told us heat pumps up 20%, boilers down high single-digits. I think you modestly raised the forecast, mentioned continued German subsidies. Maybe you could give us a little more color on what you're seeing in the markets there. Can you comment on the confidence level that you have in CSE Commercial turning with that better orders that you mentioned?

Andy, I think the really good news is that we kind of finally have seen that inflection point on heat pumps. To see that we had sales up 20%, orders for Resi in the quarter were also up 20%. We see very strong demand for heat pumps, clearly in Germany. It's pretty uniform. A little bit following the war that broke out that drove up natural gas prices. When you look at subsidy applications this year, in Germany, we'd expect those numbers to be kind of back in that 2022 kind of numbers, which were, of course, at all-time highs. We're kind of inflecting up in heat pumps. We like this ratio of electricity to natural gas below three. We like that Germany has clarified the heating law. They've kept in place key elements, and they've also kept in place subsidies.

We see that boilers will decline. Our model is typically set down around low to mid single-digits. They were down high single-digits, which impacted us a bit. We feel good with the overall formula with heat pumps up, boilers will be coming down a bit. On the Commercial side, our orders were in a little bit north of 20% in the second quarter. We saw, and frankly, that's kind of continued here in July. We saw some nice orders over these last few weeks. We're pretty well positioned for Commercial HVAC to be up in the mid single-digit range in the second half. We feel good that things are turning on the Resi side. 

We also here in the fall, we have this new product coming out that I mentioned in my prepared remarks on this Vitocal 200 that's really perfect because it maintains that Viessmann brand and all the features that customers expect, but it's going to be at a price point that's not only at the premium, but just that one layer below, which is very attractive for countries like Poland, Italy, elsewhere. I think that if you look at the macro dynamics, you look at the new product introductions, you look at the way the team's overall performing, that we're really poised for some nice growth in Europe. The issue that we've had is that we should have been more aggressive on cost and we're going to be aggressive on cost now.

Very helpful, Dave. Then maybe just your opinion on what's going on in Commercial and CSA. Obviously you changed your forecast pretty significantly here as well, much better outlook. Where is it coming from, Dave? Which markets are driving it and confidence level there?

Yeah, look, the first half was clearly much stronger than we thought, up 10%. Then you look at what's stronger than we thought. We've won some really big strategic national accounts, especially in retail. I can't list the customers' names, but they're household names that you would recognize right away, of course. We've won some big national strategic accounts. K-12 has been much better than we thought. Hospitality's been much better than we thought. What I also was encouraged by is the field inventory levels are healthy. They ended 2Q down about 20%. Orders were strong. I think orders were up something like 30% in the quarter. The team's performing well. Our coverage for 3Q is quite good. It's largely going to be just like it is for Commercial HVAC in the Americas.

It's largely an execution issue, and we have a team that knows how to execute. We feel pretty good. We feel very good about where Light Commercial was in the first half and where we'll be for the second half. I think Q3 will be up mid single-digits. Q4 will be up in the mid-teens, so we'll end up high single-digits we expect for the full year.

Your next question comes from the line of Deane Dray with RBC. Your line is open. Please go ahead.

Hey, Deane, before you ask your question, Patrick, Mike, and I all want to wish you a congratulations on your next phase. We thank you. You've been such an icon in the industry for so many years. Congratulations to you on your retirement.

I really appreciate that. It's been my privilege to follow Carrier as a public company, but also in the days going back to UTCs. I really appreciate all the support and insight you and the team have provided me over the years. Wish you continued success, but I still have a couple questions if that's okay.

Carrier Global (CARR) Q2 2026 Earnings Call Transcript

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