Carlisle (CSL) Up 5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Carlisle (CSL). Shares have added about 5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Carlisle due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Carlisle Q4 Earnings & Sales Top Estimates, Rise Y/Y
Carlisle reported impressive fourth-quarter 2022 results, wherein both the bottom and the top line surpassed the Zacks Consensus Estimate.
Carlisle’s adjusted earnings were $3.92 per share, beating the consensus estimate of $3.86 by 1.6%. The bottom line increased 34.2% on a year-over-year basis, supported by higher sales.
Inside the Headlines
In the reported quarter, Carlisle’s revenues came in at $1,455 million, up 5.7% year over year. This increase was attributable to a 6.6% rise in organic revenues and a 0.2% benefit from acquired assets, partially offset by an adverse impact of 1.1% from unfavorable changes in foreign exchange rates.
The top line surpassed the Zacks Consensus Estimate of $1,448 million by 1.3%.
CSL reports results under four segments, namely Carlisle Construction Materials (CCM), Carlisle Weatherproofing Technologies (CWT), Carlisle Interconnect Technologies (CIT) and Carlisle Fluid Technologies (CFT).
The quarterly segmental results are briefly discussed below.
Revenues from CCM totaled $800.4 million, increasing 2.2% year over year. The same represented 55% of total revenues. Organic revenues grew 3% on the back of strong demand for U.S. commercial roofing and price realization. The results were partially offset by an adverse impact of 1% from unfavorable changes in foreign exchange rates.
CWT revenues, representing 24% of total revenues, were $349.5 million, up 5.5% year over year. The increase was driven by 5.5% growth in organic revenues on account of retail strength and positive pricing. Acquired assets benefited the results by 0.8%. However, forex headwinds adversely impacted sales by 0.8%.
CIT revenues, accounting for 15.4% of total revenues, were $224.1 million, up 21.5% year over year. Organic revenues grew 21.9% owing to the robust aerospace and medical end markets. However, forex headwinds adversely impacted sales by 0.4%.
CFT revenues, reflecting 5.6% of total revenues, were $80.6 million, up 4.3% year over year. Organic revenues increased 11.3% on solid price realization and higher volumes. The results were partially offset by an adverse impact of 7% from unfavorable changes in foreign exchange rates.
Operating Margin Details
In the reported quarter, Carlisle’s cost of sales increased 2.7% to $1,012.4 million. It represented 69.6% of net sales compared with 71.6% a year ago.
Selling and administrative expenses decreased 2.4% to $188.9 million. The same represented 13% of net sales compared with 14.1% in the year-ago quarter. Research and development expenses totaled $12.8 million, down 0.8%.
Operating income was $239.6 million, up from $182.5 million year over year, while the margin grew 320 basis points to 16.5%.
Balance Sheet and Cash Flow
While exiting the fourth quarter, Carlisle had cash and cash equivalents of $400 million compared with $324.4 million at the end of fourth-quarter 2021. Long-term debt (including the current portion) was $2,583.3 million, up from $2,927.4 million at the end of fourth-quarter 2021.
In 2022, Carlisle generated net cash of $1000.9 million from operating activities compared with $421.7 million in the year-ago period.
In the same period, Carlisle rewarded its shareholders with a dividend payout of $134.4 million, increasing 19.5% year over year. The amount spent on share buyback totaled $400 million, down 26.7%.
Outlook
In 2023, Carlisle expects revenue growth in the low single-digit range from the year-ago reported figure. For the CCM segment, revenues are anticipated to grow in the low-single-digit driven by strength across the re-roofing end markets, favorable pricing measures and robust demand for energy-efficient building products. CWT segment revenues are expected to decline in low-double-digit due to the weakening residential market.
Revenues from the CIT segment are expected to increase in the high-single-digit, driven by increasing backlogs and growing demand in the Commercial Aerospace and Medical end markets. The CFT segment is anticipated to grow in the high-single-digit on the back of rising backlog, product introductions and price discipline.
The company expects the adjusted EBITDA margin for CSL to increase approximately 100 basis points, year over year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -12.63% due to these changes.
VGM Scores
Currently, Carlisle has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Carlisle has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Carlisle is part of the Zacks Diversified Operations industry. Over the past month, General Electric (GE), a stock from the same industry, has gained 6.1%. The company reported its results for the quarter ended December 2022 more than a month ago.
GE reported revenues of $21.79 billion in the last reported quarter, representing a year-over-year change of +7.3%. EPS of $1.24 for the same period compares with $0.92 a year ago.
GE is expected to post earnings of $0.12 per share for the current quarter, representing a year-over-year change of -50%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.3%.
GE has a Zacks Rank #5 (Strong Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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