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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

carrier global

Good morning, and welcome to Carrier's fourth quarter 2025 earnings conference call. I would like to introduce your host for today's conference, Michael Rednor, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Carrier's fourth quarter 2025 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. 2025 was an important year for Carrier. The short cycle residential and light commercial market softened more than we expected in the second half of the year. We made meaningful progress on our strategic priorities and reached major milestones, including growing our data center business to around $1 billion. Notably, even with CSA residential down nearly 10% and light commercial down about 20%, total company organic sales were down about 1% as we continued to drive growth in our long cycle and aftermarket businesses. We also reduced channel inventory and lowered overhead while continuing to invest in technology differentiation, salespeople, and technicians. Those actions position us for stronger incrementals when our short cycle markets recover. We had our fifth consecutive year of double-digit growth in commercial HVAC, while continuing to gain share and increase margins.

Aftermarket was also up double digits for the fifth consecutive year. We offset tariffs with aggressive cost and pricing actions, drove strong material productivity, and took decisive overhead cost actions. And as you'll see in our outlook, the cost actions that we execute into 2025 will deliver over $100 million of savings in 2026. Finally, we distributed $3.7 billion to our shareholders through buybacks and dividends. In terms of capital allocation, we remain focused on investing in the highest return opportunities, maintaining a strong balance sheet, and returning cash to shareholders. We will continue to focus on outsized growth in products, aftermarket, and system offerings, and you can see the progress we're making on all three growth vectors, starting with products on slide 4.

Our data center investments are delivering results, with fourth quarter CSA data center orders up more than 5x. We are still in the early innings, and our expanded portfolio now addresses essentially all major data center chiller applications. Our share of water-cooled chillers has increased 4x since spin, and with our recently introduced Mag-Lev bearing air-cooled chillers, we see meaningful share opportunity there as well. Key differentiators include quick restart, free cooling, and leading efficiency at elevated ambient temperatures. We introduced our first CDU for liquid cooling in 2025 and plan additional higher capacity CDUs up to 5 megawatts in 2026. Over the past couple of years, we have expanded our commercial HVAC engineering lab and chiller manufacturing capacity globally and have added hundreds of technicians.

These multi-year investments have positioned us to outgrow the commercial HVAC market, as reflected in our 2026 outlook, with double-digit revenue growth, including data centers up about 50%. Aftermarket also remains a good news story for us, as you can see on slide 5. Our playbook works, and we continue to improve upon it. Three years ago, we had 17,000 chillers connected. Today, it is over 70,000. Our attachment rate in CSA grew more than 3x last year and is now close to 60%, and our global coverage, that is, chillers covered by service agreements, is up to 110,000, including Toshiba. We estimate that 70%-80% of our high complexity chillers are under service contracts. The area within our aftermarket business where we see the highest growth potential over the next five years is modifications and upgrades.

Sales last year were up 20%. With a focused team, investments, and strategy, we see great opportunities in cities globally. In 2026, we are well positioned for double-digit aftermarket growth for our fifth—or excuse me, our sixth consecutive year. Turning to systems on slide 6. Our HEMS offering in the United States is getting tremendous attention from hyperscalers and utilities, and it is not surprising, given the magnitude of the impact that our solution can have on the grid. If our integrated heat pump battery solution were in every home and building that Carrier currently serves, we would free up nearly 15% of grid capacity during peak hours. It also weighs favorably versus alternatives in terms of time to market, cost of implementation, and affordability to the consumer. Our Carrier energy team's progress in 2025 was significant.

Through field trial, field trials in Carrier employee homes, we have been demonstrating that we can consistently provide up to four hours of battery-powered heat pump operation during peak hours. We are planning market launch later this year. Likewise, in Europe, we have been working closely with our installers to offer differentiated HEM solutions. Our System-Profi installers, those qualified to sell and install complete solutions, including heat pump, battery, solar PV, domestic hot water, all connected through our digital home energy management system offering, drove their sales up double digits last year. We plan to double our number of qualified profi installers in 2026, driving strong growth for them and us. Turning to slide seven. In our CST business, there is no better example of end-to-end solutions than what we're seeing in our container business. Four years ago, Lynx did not exist.

Today, we have over 220,000 paid link subscriptions, with over 110,000 on containers, including six of the world's top 10 shipping lines. We also recently invested in NetFeasa, which provides enhanced wireless IoT connectivity on cargo ships. By combining advanced AI-driven reefer health algorithms in our links applications with enhanced ship connectivity, we enable shipping customers to avoid manual checks on refrigerated units and to predict and avoid failures before they occur. This end-to-end solution is expected to help smooth the container cycles and provide meaningful recurring revenues while delivering differentiated customer value. Let me turn now to discussing some of our shorter cycle businesses, starting with CSA Resi on slide 8. Over the long term, residential remains a significant opportunity for Carrier.

It is a large replacement-driven market with secular tailwinds in electrification and heat pumps, and our leading brands, channels, and install base are unmatched and position us for outsized earnings growth as demand normalizes. In this market, we estimated, we estimate demand in a typical year to be around 9 million units. Between 2020 and 2024, our industry averaged 9.7 million units for a cumulative overage, so to speak, of about 3.5 million units. Last year, we estimate our industry delivered about 7.5 million units, so we absorbed about 45% of that overage. We are assuming that we absorb the balance in 2026. Our assumption for the year is essentially no change to the macro conditions that we exited last year with. Little change to mortgage rates, consumer confidence, or new and existing home sales.

That would result in total industry units down 10%-15%. With that industry assumption, our sales would be down high single digits as we benefit from the absence of destocking in the second half of 2026 compared to 2025, combined with low single-digit price realization. Turning to CSE Residential on slide 9. The good news in this market is that the transition from boilers to heat pumps is underway, with heat pumps growing double digits as anticipated. The bad news is that the total heating market has been in a cyclical downturn for the past few years. Like the Americas, the industry has been absorbing overage that we saw in the 2022, 2023 timeframe. We expect continued softness in total heating units in 2026, resulting in expected flat sales, with our growth initiatives being offset by lower industry volumes.

When unit volume stabilizes, we are well positioned to drive strong earnings growth, given our strategic initiatives and the cost actions that we have taken in this segment. Turning to slide 10 for what this all means for our full year guidance. With respect to revenue growth, we expect that about 40% of our portfolio, commercial HVAC and aftermarket, will continue to grow double digits. Expected continued softness in our higher-margin short-cycle businesses, especially CSA Residential and Light Commercial, is expected to largely offset that growth, taking the total to about 1% organic growth for the company. On the profit side, mix is expected to be a headwind, somewhat offset by the cost actions that we took last year.

Patrick will take you through the guidance in more detail, but we will continue to focus on controlling the controllables all across all aspects of growth, cost, and productivity. We are the best-positioned company in our industry when our short-cycle businesses recover, which they surely will, and we are poised to see outsized gains when they in fact recover. We enter 2026 energized and focused on outgrowing our markets, delivering best-in-class solutions for our customers, and driving productivity as we always do. With that, I will turn it over to Patrick. Patrick?

Thank you, Dave, and good morning, everyone. I'll provide some color on our results and then move to our 2026 outlook. Please turn to slide 11. For the quarter, reported sales were $4.8 billion, adjusted operating profit was $455 million, and adjusted EPS was $0.34. As expected, the year-over-year decline in these financial metrics was largely due to much lower volumes in our higher-margin CSA residential and light commercial businesses, leading to an overall 9% decline in organic growth, partially offset by 3% tailwind from foreign currency translation.

Total company orders were up over 15% in the quarter, driven by strength in CSA commercial, underscoring continued strong demand for our products in this market. Adjusted operating profit was down 33%, mainly reflecting lower organic sales and the unfavorable business mix I just referred to, as well as much lower manufacturing output, partially offset by strong productivity. The adjusted EPS decline mainly reflects lower adjusted operating profit, a lower share count, and somewhat higher interest expense and tax rate. We have included the year-over-year adjusted EPS bridge in the appendix on slide 21. Free cash flow in the fourth quarter of about $900 million reflected a large reduction in inventories and accounts receivable, and full year free cash flow of about $2.1 billion was in line with expectations.

As to full year results, you can see that our organic sales were down about 1% due to weakness in our shorter cycle businesses, which represent over 50% of our portfolio. Very strong growth in global commercial HVAC, up 14%, helped mitigate the short cycle businesses sales decline. Moving on to the segments, starting with CSA on slide 12. This segment had a very difficult quarter, with organic sales down 17%. Commercial delivered another strong quarter, with sales up 12%, but this was more than offset by lower resi and light commercial sales. Resi sales were down close to 40%, with volume down over 40%, offset by regulatory mix and price. Light commercial sales declined 20%.

Segment operating margin was just under 9%, a decline of about 10 points versus the prior year, reflecting the impact of lower sales and significant under absorption in our resi manufacturing facilities, which had less than half the output compared to Q4 of last year. At year-end, field inventories for resi were down roughly 30% year-over-year, in line with our expectations, and we believe that field destocking is now substantially behind us. Similarly, light commercial distributor inventories were down 25% year-over-year. For the full year, CSA Commercial had another excellent year, with sales up over 25%, offset by resi down 9% and light commercial down 20%. Moving to the CSE segment on slide 13. Organic sales were down 2%, with commercial up mid-single digits, offset by mid-single digits declines in resi light commercial.

The residential heating market continues to be challenging in this region, particularly in Germany, which is our largest market. The transition to electrification and heat pumps is happening, as reflected by growth in heat pump sales and a decline in boiler sales. Segment operating profit and margin were both up year-over-year on lower organic sales, reflecting the impact of cost actions. Turning to Climate Solutions Asia Pacific on slide 14. Strength in India and Australia was more than offset by ongoing weakness in resi and light commercial in China, leading to an overall 9% sales decline. Overall, sales in China were down about 20%, with resi and light commercial down about 30%, where we intentionally reduced distributor inventory during the quarter, while commercial in China was down mid-single digits.

Segment operating margin of about 12% was up 100 basis points, primarily driven by strong productivity, offset by the impacts of lower sales. Moving to transportation on slide 15. This segment had a strong quarter with 10% organic sales growth, driven by continued exceptional growth in container. Global truck and trailer was flat in the quarter, with growth in North America offset by weakness in Europe and Asia. Segment operating margins expanded by 30 basis points year-over-year, primarily driven by strong productivity, partially offset by business mix. Turning to Q4 orders on slide 16. Total company orders were up 16% for the quarter, with strength driven by commercial HVAC globally, which was up over 45%, and particularly in CSA, where commercial orders increased 80%, reflecting some large data center wins. Applied orders within CSA Commercial more than tripled compared to last year.

Light commercial orders were up 70%, with resi orders about flat. As you can see on the slide, orders were flat to up in every segment. Moving on to slide 17 and shifting to 2026 organic sales guidance. We expect flat to low mid-single-digit organic growth and reported sales of approximately $22 billion. This includes a roughly $350 million year-over-year revenue headwind from the exit of Riello, mainly reported in the CSE segment. We announced the sale in December, and our guide assumes the transaction closes at the end of the first quarter. Also, as Dave mentioned earlier, our outlook reflects continued double-digit growth in commercial and aftermarket globally, offset by continued expected softness in our shorter cycle businesses.

In commercial HVAC globally, we expect the first half to be up low to mid-single digits and the second half up mid-teens, reflecting comps and customer delivery timing. This back half acceleration reflects conversion of data center wins and delivery of our broader commercial backlog. By segment, we expect CSA and CSE to be up low single digits, while CSAME and CST are expected to be about flat. Within CSA Residential, we expect a very difficult first half, followed by growth in the second half as we benefit from the absence of destocking. CSA Commercial is expected to remain strong, and as I just mentioned, accelerating in the second half as we deliver more of our data center wins. Within CSE, our outlook for a flat RLC business largely reflects expected continued overall heating market weakness.

Within CSAME, expected declines in China are offset by growth in the rest of the segment, and in transportation, declines in container, as 2025 was a record year, are expected to be offset by modest growth in our global truck and trailer business, as well as Sensitech. Moving on to slide 18, profit and guidance. Profit and cash guidance. Total company adjusted operating profit is expected to be about $3.4 billion. The benefit of modest organic growth and productivity, including prior year overhead cost actions, are partially offset by unfavorable business mix, given high single digit declines in CSA Resi and light commercial and investments. We expect free cash flow to be approximately $2 billion, which will be second half-weighted, reflecting our normal seasonality. Finally, we intend to repurchase about $1.5 billion in shares. Moving to slide 19.

We expect adjusted EPS of approximately $2.80, up high single digits versus 2025. Adjusted EPS growth includes about $0.15 from increased operating profit, as I just outlined, as well as tailwinds from a lower tax rate and a lower share count, which are partially offset by higher net interest expense, NCI, and the exit of Riello. As usual, additional guide items are in the appendix on slide 23, and our guide assumes no change to the macro, including the current tariff environment. Finally, let me provide some additional color on the first quarter. As we've communicated previously, CSA Resi faces a very tough compare. We anticipate total Company Q1 revenues to be about $5 billion, with organic revenue down high single digits%, including CSA Resi, down over 20%.

We expect Q1 company operating margin to be about 10%, largely reflecting the sales and manufacturing volume pressure in our higher margin short cycle businesses. Adjusted EPS is expected to be about $0.50, which includes the benefit of about a 0% effective tax rate due to a discrete tax item in the first quarter. Free cash flow is expected to be a use of a few hundred million dollars, in line with our normal operating cadence. While we expect sales and EPS to be pretty well balanced between the first and second half of the year in absolute terms, the year-on-year growth in sales and EPS will obviously be second half-weighted. Overall, we will continue to drive operational excellence throughout our businesses as we return to organic growth and margin expansion and remain focused on executing in 2026.

With that, I would like to ask the operator to open it up for questions.

We will now begin the question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star one again. Please pick up your handset when asking a question. If you are 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 Nigel Coe with Wolfe. Your line is open. Please go ahead.

Thanks. Good morning. Wow, what a, what a year, huh? Thanks for all the details. I did, I did want to, maybe, Patrick, dig a little bit deeper into the 1Q, you know, sort of mix. And can you just maybe talk about, you know, the, the CSA, margins? And it, I, it looks to me, if, if I, if I just, eyeball the numbers, it looks like maybe closer to 10%, maybe, maybe low double-digit margins in, CSA. And, number one, is that correct? And secondly, maybe just run through some of the drivers of that.

You know, the fixed cost absorption headwinds that you're facing, you know, any kind of raw material impacts, you know, just, you know, kind of what's driving that margin and maybe the, the recovery path from there.

Yes. There's a lot there. I'll start with CSA expected margins in Q1. We expect them to be close to about 15% in Q1. And from an overall company point of view, the way you can think about Q1 is Q1 actually looks very similar to Q4 of 2025, but with a bit higher sales at about $5 billion and about a point higher of an operating margin point of view. In Q4, our resi sales were down about 40%, and we expect resi sales in Q1 in the Americas to be down about 20%-25%.

And so that explains a little bit of the uptick in margin in Q1, and then in Q1, because of the 0% effective tax rate, there is about a $0.10 benefit versus Q4. So about a 15-cent improvement-

... 5 points, $0.05 of that is better CSA performance, $0.10 of that is a lower tax rate.

Okay. Just the 10%, the 10% overall operating margins is what threw me off there. So maybe talk about the other segments, other downside drivers in the other segments.

Yes, if I go through the other segments, the transportation segment is expected to have similar margins to the prior year, about 14%. Asia had very strong margins in the first quarter of 2025. We think the margins will be similar to what we've seen in the fourth quarter of 2025, so about the 10%-11% range. In Europe, we think that the margins will be similar in Q1 as they were in Q4. So generally, similar margins as to what we've seen in our businesses in the fourth quarter of the year.

The Americas a little bit better, less of a headwind of resi.

Your next question comes from Julian Mitchell with Barclays. Your line is open. Please go ahead.

Hi, good morning. Maybe, just wanted to understand, a little bit more about full year guidance for the, CSA residential business. Maybe help us understand what you're seeing in the market on, pricing and how you see, industry discipline on the, the price front. And maybe help us clarify, kind of how much volume fair gain or outperformance you're expecting this year relative to that, double digit, I think, sell-in market decline.

Yeah, Julian, let me kinda walk you through how we came up with our forecast and guidance for this year. So we're assuming at the highest level that industry conditions are the same as last year. So no improvement on interest rates, consumer confidence, new or existing home sales. We assume that the second half of 2026 industry units are the same as the second half of 2025. So on a two-year stack, that would mean a 30% decline in industry units, which is what we assume for the first half of 2026. So all the result there is that in the first half of this year, industry units would be down year-over-year by 20%-25%, and in the second half, industry units would be flat to the second half of last year.

So the full year would be down, industry units down 10%-15%. Now, Julian, what it means for us is that we believe that the distributor inventory destocking that occurred in the second half of last year is substantially behind us. So therefore, we think that in the first half of this year, we'll be down 20%-25%, consistent with movement. And in the second half, sales will be up. Our sales will be up 10%, given the absence of last year's second half destocking. So a bit complicated, but what that all means is the net result of all of this is that we expect our sales and our sales and our volume to be down high single digits year-over-year, with our sales including about a low single digit benefit from pricing.

That's super helpful. Thanks very much. Maybe my question would go on a different topic around CSE. You know, you had this dynamic in 2025, where decent heat pump growth, offset by a boiler price and sort of mix headwind. Just wondered what you're dialing in for that CSE RLC market for the year ahead and how you see your own internal dynamics vis-a-vis heat pump and boilers playing out.

Well, look, I think the mix-up is essentially playing out as we thought, you know? So, the issue is that what we're predicting for this year, for 2026, is that the industry overall in Europe will be down mid- to high-single digits. Now, we guided to flat because we do get the benefit of mix up. You know, heat pumps up double digits, boilers down low- to mid-single digits. We'll see aftermarket up double digits, which drops through at a point, a point or two. And then we have our growth initiatives and our revenue synergies, which are frankly playing out well. The big issue that we've been having, frankly, is in Germany, where we're of course overweighted.

So remember, we were thinking that the German market would go from something like 715,000 to 660, then we thought 640,000, and it ended up around 600,000. If you look over historically, the German market is about 800,000. So just like in the U.S., we do think there will be a reversion to the mean. We just don't think it happens this year, given some of the continued ambiguity and uncertainty around some of the heating laws in Germany.

Your next question comes from the line of Scott Davis with Melius Research. Your line is open. Please go ahead.

... I'm looking at slide 8, and I'm just trying to figure out how far below normal do you think channel inventories are in CSA resi?

Yeah, Scott, as we sit here today, we ended January versus January of last year, down about 32%. So we, we did go to great lengths with our channel partners to end at the field inventory levels that we had, we had said, and, you know, that's putting us at, like, 2018-type levels. So the good news is that the field inventory that we targeted to get down, we got down, and we've continued to take it down here in January.

Okay, helpful. And, moving to more fun stuff, data center is obviously usually helpful here, but I don't know how far out you're booking orders, but when you think about the billion-dollar revenue numbers that you put up, 60% up orders kind of implies $1.6 billion for 2026. Is that somewhere in the ballpark? And perhaps there could be some orders in 2027 and stuff. I'm sure it's not perfect, but I'm just trying to get a sense of that, how that orders flows through to revenues in 2026.

Yeah, Scott, that's about right. What we're guiding is to $1.5 billion for this year, so you're in the ballpark.

So we saw great orders last year, I mean, phenomenal orders in Q4. January's been good, so we feel very well positioned. Now, the reality is that we have a lot more in Q3 and Q4. We would love to see a little bit more pulled in, but right now, that's when the customers that we've had great wins with are looking for the deliveries, but we feel really good about data centers for this year.

Okay. Helpful color. Thanks. Best of luck, guys. Appreciate it.

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

Hey, Dave, can we just talk about the inventory dynamics just a little further? So, so clearly, you saw a pretty big reduction in your inventories Q on Q. I think it was down 17%, but the inventory levels were up year-over-year about 8%. And so is that a, is that a function of just building inventories in the parts of your business that are growing? Just give us any more detail on, on that dynamic.

Hey, Joe. Patrick here. You may recall that we decided last year to keep our U.S. resi manufacturing facilities running at minimal levels because it was more economical than shutting them down for several months and then having a cold start. As a result, there is $200 million more inventory on our books at the end of the year than we otherwise would, and our current guide assumes that that gets liquidated through the year. Quarter-over-quarter, inventories actually dropped.

Got it. Okay, great. That's helpful, Patrick. And then one last question. I know we're kind of beating a dead horse here on the resi side, but this 6.5 million unit industry average, I mean, assuming whatever you want to assume for new housing starts, you know, call it somewhere in that million, 1.5 million zone, really kind of assumes a replacement rate that's like north of 20 years for this year. It just seems, you know, it seems conservative at first blush.

Just any thoughts around, you know, if you go back even further, Dave, and you take a look at, you know, where the industry was even before that kind of 2020 time frame, like, you know, do you really think that for the year, you're gonna need to flush out, this much demand in order to get back to equilibrium, or just trying to be conservative to start the year? Thank you.

You know, Joe, what we start with are some of those bigger picture analyses, you know, the average, you know, with new home construction of 9, 9.7 and 3.5 average, last year, 7.5. So we kinda use that for triangulation. Then we go towards what we're seeing with boots on the ground in the marketplace, and we're seeing that what we ended last year, a lot of those macros, we did not assume that we'd wake up on January first, and they'd all be suddenly better and different. So that's why we did the analysis that I kinda took Julian through of what we assumed in the second half, we just assumed for the second half of this year. 'Cause, you know, it is a seasonal business.

We can't assume something for the second half and apply those volumes to the first half. So we tried to be as pure as we could about the analysis that we applied, and then we applied that two-year stack to 2024. So look, you know, we've guided to down high single digits for us, the market down 10-15, and if things play out exactly as they did in the second half, that's about where we would end up this year. Do we hope it's better? Of course, but that's how we're planning.

Your next question comes from the line of Steve Tusa with J.P. Morgan. Your line is now open. Please go ahead.

Just on the resi side, I haven't done the math, but what do you think for the year now, like, movement ended at, you know, in the channel? And what are you assuming movement is for next year?

... like help me with what movement was in fourth-

Yeah, Steve, Steve, movement was down about 30% in Q4.

Okay. So that's the sellout number. Okay. And then what are you guys assuming for inflation and total company price? And are you or how are you marking the commodities? Are you marking them, like, to market today or year-end, or maybe just some color on the inflation side?

Steve, in terms of pricing, Dave mentioned about low single digits, so give or take, close to a point for the total company. In terms of commodities, we block on a rolling four quarters. And today, as of today, we have about a $60 million headwind related to copper, steel, and aluminum, headwind for this year, and that is net of our blocking position. And that headwind is about equal across the four quarters. And we're about fifty-- a little over 50% blocked for the full year.

Okay, and the 1% is in resi as well, or is resi a little higher than 1?

You know, Steve, we announced a price increase of up to, I think, 5 or 6, effective in March. And we think we'll realize in that low single-digit range.

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

Dave, you obviously talked about the $100 million of cost benefits expected in 2026 that you actioned in 2025. Maybe you could talk about how the benefits are layering in in 2026, and if, for instance, CSE residential or CSAME continues to drag, what can you do to protect the margin improvement you have in your guidance?

Okay, I'm gonna make sure I get the question, but I'm gonna walk you through the profit walk 2026 versus 2025. At a high level, we're targeting about $100 million of incremental operating profit. Volume mix combined is a headwind of about $100 million. We talked earlier about price. So price is about a point. If I combine that with some of the tariffs, it's about $100-$200 million. Productivity, including the cost actions that we have taken, is close to $400 million. You offset that with some of the inflation that I mentioned, the annual increase in merit, and then investments, and basically you get to about $100 million increase in operating profit.

Then, of course, the segments each have their targets and are working on contingency plans depending on how they perform versus their targets for the year.

Helpful, Patrick. Dave, maybe you can touch on the guide for CSAME and the confidence level there for flat in 2026. As you know, China RLC revenue was down 30% in Q4 2025. You talked about destocking, but it looks like your orders bounced back a little and maybe easy confidence in China. So give us more on what you're seeing there versus the rest of Asia.

You know, for AME for 2026, Andy, we were guiding flat. We expect China to be down about high single digits. We think RLC softness continues. We think that's down about 20, with the CA track business in China being up low single digits, and then the rest of Asia to grow high single digits. We've been doing very well in places like India and the Middle East. Japan, you know, those that are watching us for the last two years, Japan actually grew 8%. And frankly, when we bought that Toshiba business, very little growth with margins pretty close to zero, and by the end of this year, our EBITDA should be in the mid-teens, and last year we grew 8%. So a lot of good work outside of China. Resi in China remains tough.

We tried to take some actions in the fourth quarter to decrease the amount of inventory in the channel on the residential side, so hopefully, that helps us a bit going into next year, but the macros in that resi channel business are still tough.

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

Carrier Global (CARR) Q4 2025 Earnings Call Transcript

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