Wolfe Research analysts downgraded shares of Carrier Global (NYSE:CARR) to Underperform from Peer Perform in a note Thursday, assigning the stock a price target of $56 per share.
The analysts explained that CARR could be acquiring Viessmann just as the German heat pump market turns materially negative.
"We are downgrading CARR from PP to UP rating following some revisions to our pro-forma model assumptions that embed the acquisition of the German HVAC company Viessmann by end of this year, and the disposals of its F&S and Commercial Refrigeration businesses through FY24," the analysts explained.
"The bottom line is that we now see 11% EPS dilution for 2025 as we factor in a more challenging outlook for EU heat pump demand and now see risk that Viessmann financing costs could be closer to 6.5% (vs. prior 5.5%," they added.
While Wolfe Research believes CARR is "pursuing a strategically coherent path that likely leads to a higher value portfolio," they said the precedent examples of major portfolio transitions are not encouraging.