Carrier Global Corporation (CARR) Cash Flow Statement

The extreme quarterly swings in OCF/NI, from 0.05 to 19.11, are largely attributable to working capital timing and one-time items, not core earnings quality. Q2 2026's ratio of 1.85 indicates that operating cash flow is comfortably exceeding net income, a positive signal. However, the persistent gap between net income and operating cash flow in quarters like Q1 2026 (0.33) suggests that accruals and working capital volatility remain significant, warranting close monitoring.

The sequential recovery in FCF margin from -0.3% to 12.8% is encouraging, but the absolute level still lags key peers, indicating that Carrier has not yet fully converted its revenue growth into cash generation. The cumulative FCF over the last four quarters (Q3 2025-Q2 2026) is approximately $2.48 billion, which is modest relative to its market cap, suggesting that the market may be pricing in future improvements. Investors should monitor whether the backlog conversion and operational leverage can drive FCF margins toward the mid-teens.

Carrier's capital intensity is remarkably low, with CapEx/Revenue consistently below 3% in recent quarters, which supports strong FCF generation. This suggests that the company's growth is not heavily dependent on heavy capital investment, but rather on working capital efficiency and service-based revenue. The low capex also implies that maintenance capex is minimal, allowing more cash to be returned to shareholders or used for acquisitions.

The extreme volatility in working capital changes, particularly the $705M positive swing in Q4 2025 and the -$554M in Q2 2025, indicates that Carrier's cash flow is highly sensitive to timing of collections, inventory, and payables. This pattern is typical for project-based businesses with large contracts, but it complicates quarterly comparisons. The positive working capital contribution in Q4 2025 and Q2 2026 suggests that the company is efficiently managing its receivables and payables, but the negative swings in other quarters highlight the need for careful cash flow forecasting.

Capital deployment remains aggressive, with significant share repurchases in every quarter of 2025 and 2026, totaling over $3.5 billion in the last four quarters. This, combined with consistent dividend payments, indicates a strong commitment to returning cash to shareholders. However, the pace of buybacks may be constrained by the need to deleverage after the Viessmann acquisition, as evidenced by the $10.8B acquisition outflow in Q1 2024. Investors should monitor whether the buyback pace is sustainable given the company's leverage and integration costs.