Stock Analysis on Net
Stock Analysis on Net

Carrier Global Corp. (NYSE:CARR)

This company has been moved to the archive! The financial data has not been updated since April 26, 2023.

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Carrier Global Corp., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 12.81%
01 FCFF0 1,638
1 FCFF1 1,831 = 1,638 × (1 + 11.81%) 1,623
2 FCFF2 2,032 = 1,831 × (1 + 10.98%) 1,597
3 FCFF3 2,239 = 2,032 × (1 + 10.16%) 1,560
4 FCFF4 2,448 = 2,239 × (1 + 9.33%) 1,511
5 FCFF5 2,656 = 2,448 × (1 + 8.51%) 1,454
5 Terminal value (TV5) 67,005 = 2,656 × (1 + 8.51%) ÷ (12.81% – 8.51%) 36,676
Intrinsic value of Carrier Global Corp. capital 44,421
Less: Long-term debt, including current portion (fair value) 7,385
Intrinsic value of Carrier Global Corp. common stock 37,036
 
Intrinsic value of Carrier Global Corp. common stock (per share) $44.36
Current share price $40.65

Based on: 10-K (reporting date: 2022-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

Carrier Global Corp., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 33,936 0.82 15.12%
Long-term debt, including current portion (fair value) 7,385 0.18 2.17% = 2.90% × (1 – 25.10%)

Based on: 10-K (reporting date: 2022-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 834,838,102 × $40.65
= $33,936,168,846.30

   Long-term debt, including current portion (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (16.50% + 29.10% + 29.70%) ÷ 3
= 25.10%

WACC = 12.81%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Carrier Global Corp., PRAT model

Microsoft Excel
Average Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in millions)
Interest expense 302 319 298
Net income attributable to common shareowners 3,534 1,664 1,982
 
Effective income tax rate (EITR)1 16.50% 29.10% 29.70%
 
Interest expense, after tax2 252 226 209
Add: Dividends declared on common stock 533 442 243
Interest expense (after tax) and dividends 785 668 452
 
EBIT(1 – EITR)3 3,786 1,890 2,191
 
Current portion of long-term debt 140 183 191
Long-term debt, net of current portion 8,702 9,513 10,036
Equity attributable to common shareowners 7,758 6,767 6,252
Total capital 16,600 16,463 16,479
Financial Ratios
Retention rate (RR)4 0.79 0.65 0.79
Return on invested capital (ROIC)5 22.81% 11.48% 13.30%
Averages
RR 0.74
ROIC 15.86%
 
FCFF growth rate (g)6 11.81%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 See details »

2022 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 302 × (1 – 16.50%)
= 252

3 EBIT(1 – EITR) = Net income attributable to common shareowners + Interest expense, after tax
= 3,534 + 252
= 3,786

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [3,786 – 785] ÷ 3,786
= 0.79

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 3,786 ÷ 16,600
= 22.81%

6 g = RR × ROIC
= 0.74 × 15.86%
= 11.81%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (41,321 × 12.81% – 1,638) ÷ (41,321 + 1,638)
= 8.51%

where:

Total capital, fair value0 = current fair value of Carrier Global Corp. debt and equity (US$ in millions)
FCFF0 = the last year Carrier Global Corp. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Carrier Global Corp. capital

FCFF growth rate (g) forecast

Carrier Global Corp., H-model

Microsoft Excel
Year Value gt
1 g1 11.81%
2 g2 10.98%
3 g3 10.16%
4 g4 9.33%
5 and thereafter g5 8.51%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 11.81% + (8.51% – 11.81%) × (2 – 1) ÷ (5 – 1)
= 10.98%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 11.81% + (8.51% – 11.81%) × (3 – 1) ÷ (5 – 1)
= 10.16%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 11.81% + (8.51% – 11.81%) × (4 – 1) ÷ (5 – 1)
= 9.33%