Patrick P. Goris
Senior Vice President & Chief Financial Officer at Carrier Global
Thank you, Dave, and good morning, everyone. Please turn to slide nine. We had a good start to the year. Q1 earnings were well ahead of our expectations and the guide we provided in February. Reported sales of $6.2 billion were up 17%, with organic sales up 2% and a 15% net contribution from acquisitions and divestitures, substantially all Viessmann Climate Solutions. Q1 adjusted operating profit of $927 million was up 44% compared to last year, driven by favorable price and productivity and the contribution of Viessmann Climate Solutions, partially offset by investments. Strong price and productivity also drove adjusted operating margin expansion of 280 basis points compared to last year, despite the about 50 basis point dilutive impact from Viessmann. Core earnings conversion, that is excluding the impact of acquisitions, divestitures and currency, was well over 100% in the quarter.
Adjusted EPS of $0.62 was up 19% year-over-year and was well ahead of our Q1 guide of $0.50. March was particularly strong, representing 50% of Q1 earnings. Compared to last year, price and productivity more than offset the impact of increased investments and the expected $0.06 dilution from Viessmann Climate Solutions. We have included a year-over-year adjusted EPS bridge in the appendix on slide 23. Compared to our Q1 expectations, productivity came in stronger, and we benefited from the timing of a few items, including tax, amounting to about $0.05. Free cash outflow of $64 million was in line with typical seasonality and also reflects payments of M&A-related fees. Moving on to the segment, starting on slide 10. HVAC reported sales growth of 25% reflects the contribution of Viessmann Climate Solutions and 2% organic sales growth. Organic sales in the Americas were up mid-single digits, driven by continued strength in commercial and light commercial, each up around 20%.
This was partially offset by a low-single-digit decline in resi. North America resi volume was down mid-single digits, as we guided, and we expect volume to be up year-over-year in each of the remaining quarters. Organic sales in EMEA were down high-single digits, driven by significant weakness in resi light commercial, while commercial sales in EMEA remained strong and were up around 10%. Sales in Asia Pacific were flat, with growth in China, offsetting a decline in Japan as we continue to improve our mix in that country. This segment had very strong quarter -- had a very strong quarter, with a 240-basis-point adjusted operating margin expansion due to price and strong productivity and despite the consolidation of Viessmann Climate Solutions that negatively impacted margin by about 80 basis points.
VCS earnings were broadly in line with our expectations, with favorable mix, productivity and synergies offsetting the impact of lower-than-expected sales. An excellent quarter for HVAC. And based on first quarter operational performance, we now expect 2024 full year HVAC segment margins to be up -- to be about 17.5%, up about 100 basis points compared to last year. Transitioning to refrigeration on slide 11. Both reported and organic sales were down 2%. Within transport, container was up over 50% year-over-year and global truck and trailer was down low teens, driven by North America truck and trailer which was down about 25%, reflecting overall demand and elevated field inventories. As a reminder, North America truck and trailer was up over 40% in last year's Q1. European truck and trailer was flat, and Asia truck and trailer was up a strong 20%. Our Sensitech business, which provides solutions for tracking and monitoring performance at temperature was up mid-single digits.
Commercial refrigeration was down low-single digits year-over-year. We now expect the refrigeration segment to be up low-single digits in 2024 organically. Adjusted operating margin was down 120 basis points compared to last year. This was mainly due to the absence of a $24 million gain related to a sale in last year's first quarter. Excluding that gain, Q1 adjusted operating margins were up 150 basis points year-over-year, driven by price and productivity. Moving on to Fire & Security on slide 12. This segment had strong financial performance in the quarter. Reported sales were up 2%, with 7% organic sales growth, partially offset by a 5% headwind from the KFI deconsolidation. The residential and commercial fire business was up mid-single digits. Adjusted operating profit was up over 50% versus the prior year, and adjusted operating margins were up a significant 610 basis points year-over-year as volume growth, strong productivity and currency more than offset the headwind of the KFI exit.
Overall, a very good quarter for this segment. Turning to slide 13. Total company orders were down about 7% in the quarter, mostly driven by North America truck and trailer orders due to a tough compare. In Q1 of 2023, North America truck and trailer orders were up 50% year-over-year, five-zero. Excluding North America truck and trailer, Carrier's organic orders were flattish in Q1. Overall, HVAC orders were down between 0% and 5% in the quarter. Within the Americas, commercial orders were up mid-single digits and North America resi orders had a second consecutive quarter of year-over-year growth. Light commercial orders were down roughly 35% as order rates are impacted by lead times and a tough compare. EMEA commercial orders were up almost 30%, with applied equipment orders up around 60%, including an over 45% increase in data center orders. Organic resi and light commercial order intake in EMEA remains very weak. Within Asia, weak orders in Japan offset growth in other regions.
Globally, commercial HVAC orders were up about 10%, and the backlog for that business continues to grow year-over-year and sequentially. Refrigeration orders were down about 25% to 30% in the quarter, mostly driven by the over 40% decline in global truck and trailer, reflecting the trends in North America, I mentioned earlier, along with growth in Europe and Asia. This was only partially offset by continued growth in orders in the container business, where orders were up high teens. Orders in Fire & Security were flat. Turning to slide 14, guidance. Compared to our prior guidance, the only change with respect to exits is that industrial fire is now included for the first half of the year. Our prior guide included a full year of industrial fire as no definitive agreement had been announced at that time. So all three announced exits, access solutions, commercial refrigeration, and industrial fire are now included for the first half only of our 2024 full year guidance.
Taking that into account, we now expect reported full year sales of a little less than $26 billion. Earlier business exit timing represents roughly $400 million of reduction and currency translation, another $100 million. Lower expected revenue at Viessmann Climate Solutions is roughly offset by expected upside in light commercial and commercial HVAC. The underlying organic growth rate in our guidance remains, therefore, unchanged at mid-single digits. We are increasing our adjusted operating margin guidance to roughly 15.5%, driven by the strong earnings performance in Q1. We now expect full year earnings conversion to be north of 40%. Interest expense will be about $25 million lower, given the redeployment of the net proceeds from the industrial fire sale. We are maintaining our adjusted EPS guidance range despite the earlier exit of industrial fire, which is a $0.05 headwind, given stronger performance in our core business.
With the strong performance in Q1 and the exit of industrial fire in the second half, we now expect roughly 50% of full year adjusted EPS to be realized in the first half of the year. Before I get to free cash flow, I'd like to remind you that proceeds from the sale of businesses are reflected in cash flow from investing, and therefore, do not impact free cash flow. However, the tax payments on the gains on the sale of businesses are reflected in cash flow from operations and therefore, do impact free cash flow. Whereas this, of course, does not impact overall cash performance for the company, it does impact our free cash flow metric. Our free cash flow outlook is now $400 million, reflecting about $2 billion of tax payments on gains from the business exits and transaction-related costs. So no change in the $2.4 billion underlying free cash flow performance versus the prior guidance. The lower free cash flow outlook only reflects expected tax payments on the now announced industrial fire sale. Moving on to slide 15.
Adjusted EPS guide to guide bridge. As you can see, our adjusted EPS guide at the midpoint remains $2.85, with stronger operational performance offsetting the $0.05 impact of the earlier exit of industrial fire and the impact of lower expected sales at Viessmann Climate Solutions. The darker blue represents the businesses we are retaining, including Viessmann Climate Solutions, whereas the lighter blue represents the adjusted EPS contribution from the businesses we are exiting. At the midpoint of our new guidance, core adjusted EPS increases $0.05 compared to our February guide to $2.60. In the appendix on slide 24, you will find a year-over-year adjusted EPS bridge at guidance midpoint. Given the tremendous transformation in the portfolio this year, slide 16 may be a helpful framework for 2025.
We start with a baseline of $2.60 from the core business at the midpoint of our 2024 guidance. In addition to our double-digit adjusted EPS growth target from our value creation framework, we expect another half year benefit from deploying the proceeds of industrial fire towards debt reduction. In addition to that, net proceeds from the exit of commercial and residential fire would be available for deployment, including for buybacks. Finally, an additional lever is 2024 and 2025 free cash flow funded share repurchases. All of this is consistent with our prior messaging that we intend to repurchase at least the equivalent 58.6 million shares issued to the Viessmann family, while maintaining a solid investment-grade credit rating. In short, we have several levers available to deliver meaningful adjusted EPS growth in 2025 and beyond.
With that, I'll turn it back over to Dave for slide 17.
