After a Recent Pullback, JPMorgan Upgrades This HVAC Stock, Predicting 25% Gains

JPMorgan sees recent weakness in Carrier Global Corporation’s stock as a potential buying opportunity. The firm upgraded its rating on Carrier shares from "neutral" to "overweight" and increased the price target from $77 to $78, suggesting a 25.7% upside from Tuesday’s closing price.

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Despite the upgrade, Carrier shares fell nearly 2% on Tuesday, extending their year-to-date losses to about 9%. The decline followed the implementation of a 25% tariff on Mexican imports imposed by former President Donald Trump. Analyst Stephen Tusa highlighted that Carrier is particularly vulnerable to these tariffs due to its "significant presence" in Mexico.

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In a client note issued Wednesday, Tusa argued that Carrier’s current valuation presents an attractive opportunity compared to its industry peers. He pointed out that the stock trades below other heating, ventilation, and air conditioning (HVAC) companies and is the most appealing among the top three premium players. Tusa acknowledged that the HVAC sector faces considerable uncertainty and that Carrier’s guidance is not particularly conservative.

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However, he believes the company's targets are achievable, meaning the cycle of earnings revisions is likely complete. With the stock trading at a relative low compared to competitors, Tusa suggests it stands out as a value play.

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Carrier’s stock is currently over 25% below its 52-week high, making it "more attractively valued," according to Tusa. Data from FactSet indicates that the company’s forward price-to-earnings (P/E) ratio is approximately 20.16. Tusa further stated that while the broader HVAC sector is not yet priced low enough for a full commitment, Carrier is undervalued on a sum-of-the-parts basis.

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This undervaluation reflects a disconnect between how the market perceives Carrier’s fundamentals compared to its peers—a gap Tusa believes will narrow over time.

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Regarding the potential impact of tariffs, Tusa noted that Carrier remains confident in its ability to manage the financial burden. The company expects to offset tariff-related costs through price increases and adjustments to its supply chain if necessary.

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Market sentiment toward Carrier appears generally positive. According to LSEG data, 15 out of 26 analysts covering the stock rate it as either a "strong buy" or "buy." The consensus 12-month price target is nearly $81, implying a potential upside of over 30% from current levels.

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Following JPMorgan’s upgrade, Carrier shares rose by more than 2% on Wednesday, signaling investor optimism. Tusa’s more bullish stance on the stock reflects confidence that Carrier’s current valuation discount will eventually align with industry benchmarks, providing investors with significant upside potential.

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