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Finance

2 Recent IPOs to Consider Adding to Your Portfolio

The bullish equity markets and favorable investor sentiment have incentivized several private companies to go public over the past couple of months. The low-cost alternatives to traditional IPOs, such as direct listings and SPACs, have also boosted stock market debuts over the past year. As of June 15, initial public offerings in the United States raised $171 billion, surpassing 2020’s $168 billion. 

The average one-day return for U.S. IPOs through June 30, 2021 was 40.5% versus 28.2% during the same period in 2020. Global IPO proceeds reached 20-year highs in the first quarter of 2021. Global IPO volumes have increased 85% year-over-year, with  proceeds increasing 271% year-over-year.

However, investors should consider a company’s financials and growth prospects before investing in its freshly traded shares. With this in mind, we think fundamentally sound companies Carrier Global Corporation (CARR) and Otis Worldwide Corporation (OTIS), which were spun off from renowned United Technologies Corporation, could be good additions to one’s portfolio.

Carrier Global Corporation (CARR)

CARR is a leading global provider of heating, ventilating, and air conditioning (HVAC), refrigeration, fire, security, and building automation technologies. The company operates through three segments: HVAC, Refrigeration, and Fire & Security.

CARR, which is based in Palm Beach Gardens, Fla., was listed on the NYSE following its spinoff from parent company United Technologies Corporation on April 3, 2020. CARR has gained 111.8% over the past year to close yesterday’s trading session at $48.17. The stock has gained 28.6% year-to-date.

On June 3, CARR announced the acquisition of a controlling stake of Guangdong Giwee Group (Giwee Group) and its subsidiaries. This move will give CARR the access to Giwee’s core capabilities and should contribute to the company’s  growth.

In  March, CARR and Watsco, Inc. (WSO) jointly acquired Temperature Equipment Corporation (TEC), the largest Carrier distributor in the Midwest, contributing  to CARR’s commitment to expand its market reach.

CARR’s net sales increased 20.9% year-over-year to $4.70 billion in its fiscal first quarter, ended March 31. Its operating profit stood at $571 million, up 81.3% from the same period last year. Its net income grew 300% from its  year-ago value to $384 million. The company’s EPS increased 290.9% year-over-year to $0.43.

A $19.34 billion consensus revenue estimate  for the current year indicates a 10.8% increase year-over-year. The Street expects the company’s EPS to rise 24.1% from the prior year to $2.06 in the current year. Furthermore,  CARR surpassed the Street’s EPS estimates in three out of the trailing four quarters.

CARR has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

CARR has an A  grade  for Sentiment, and a B grade  for Value. It is ranked #11 of 54 stocks in the A-rated  Industrial – Building Materials industry.

Click here to view additional CARR Ratings for Momentum, Growth, Quality, and Stability.

Otis Worldwide Corporation (OTIS)

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OTIS, which is based in Farmington, Conn., is the world’s leading company in the manufacture and installation of elevators and escalators. It also provides related services worldwide. The company operates through two segments, New Equipment and Service. With more than 2 million customer units worldwide, OTIS  has the world’s largest portfolio.

OTIS is another entity created from a  United Technologies’ spin off. The company made its stock market debut on April 3, 2020. Shares of OTIS have gained 46.3% over the past year, and 22.4% year-to-date.

On June 8, OTIS introduced Otis Gen3™ and Gen360™. They are  new generation digital elevator platforms that add to its vast product base. This elevator platform upgrade in the context  of digitization should garner prominent returns for the company.

OTIS’ net sales increased 14.9% year-over-year to $3.41 billion in the fiscal first quarter, ended March 31. Its operating profit grew 54.7% from its  year-ago value to $509 million, while its net income improved 86.7% year-over-year to $308 million. The company’s EPS increased 86.8% year-over-year to $0.71.

Analysts expect OTIS’ revenues to increase 8.4% year-over-year to $3.48 billion in the current quarter ending September 2021. A  $0.72  consensus EPS estimate for the current  quarter represents  a 4.3% rise from the same period last year. OTIS has an impressive earnings surprise history also;  it beat the consensus EPS estimates in each of trailing four quarters.

It is no surprise that OTIS has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The stock also has a B grade for Stability, Sentiment, and Quality. Among the 84 stocks in the A-rated Industrial – Machinery industry, OTIS is ranked #23.

To see additional OTIS ratings for Growth, Value, and Momentum, click here.

Click here to check out our Industrial Sector Report for 2021

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CARR shares were trading at $48.94 per share on Wednesday afternoon, up $0.77 (+1.60%). Year-to-date, CARR has gained 30.44%, versus a 16.92% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More…

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