Carlisle (CSL) Up 7.8% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Carlisle (CSL). Shares have added about 7.8% 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 Top Estimates, Up on Solid Sales

Carlisle reported better-than-expected results for the fourth quarter of 2018, delivering a positive earnings surprise of 30.6%.

The company’s adjusted earnings in the reported quarter were $1.58 per share, surpassing the Zacks Consensus Estimate of $1.21. Also, the bottom line increased 46.3% from the year-ago quarter’s number of $1.08.

For 2018, the company’s adjusted earnings per share were $6.22, surpassing the Zacks Consensus Estimate of $5.60. Further, it was roughly 22% above the year-ago tally of $5.10.

Core Sales and Acquisitions Drive Revenues

In the reported quarter, Carlisle’s net sales were $1,077.3 million, increasing 8.8% year over year. The improvement was driven by a 5.3% contribution from organic sales growth and 4.3% benefit from acquired assets, partially offset by 0.4% adverse impact of foreign currency translation. As a matter of fact, in fourth-quarter, currency translation had an adverse impact of 200 bps on the company’s year-over-year revenue growth rate.

The top line surpassed the Zacks Consensus Estimate of $1.06 billion.

The company reports results under four segments — Carlisle Construction Materials, Carlisle Interconnect Technologies, Carlisle Fluid Technologies, and Carlisle Brake & Friction. The quarterly segmental results are briefly discussed below:

Revenues from Carlisle Construction Materials (CCM) totaled $676.3 million, increasing 9.3% year over year. It represented 62.8% of net sales. Organic sales grew 2.8% and acquired assets had a positive impact of 6.6%. These were partially offset by 0.1% adverse impact of forex woes.

Carlisle Interconnect Technologies’ (CIT) revenues, representing 21.5% of net sales, were $231.6 million, up 11.1% year over year. The improvement was driven by 12.7% growth in organic sales and 0.7% benefit from acquired assets, partially offset by 0.2% adverse impact of unfavorable movements in foreign currencies and 2.1% negative impact of revenue recognition.

Carlisle Fluid Technologies’ (CFT) revenues, representing 7.6% of net sales, were $82.4 million, up 4.3% year over year. In the reported quarter, organic sales grew 5.8% while forex woes had an adverse 1.5% impact.

Carlisle Brake & Friction’s (CBF) revenues were $87 million, increasing 3.2% year over year. It represented 8.1% of net sales in the quarter under review. Organic sales expanded 4.9% while unfavorable movements in foreign currencies had a 1.7% adverse impact.

For 2018, the company’s net sales were $4,479.5 million, increasing 19.4% year over year. The top line surpassed the Zacks Consensus Estimate of $4.46 billion.

Operating Margin Improves Y/Y

In the reported quarter, Carlisle’s cost of sales grew 8% year over year to $798.5 million. It represented 74.1% of net sales versus 74.6% recorded in the year-ago quarter.

Selling and administrative expenses in the quarter under review grew 6.3% year over year to $152.1 million. It represented 14.1% of net sales versus 14.4% in the year-ago quarter. Research and development expenses totaled $14.7 million versus $13.8 million in the year-ago quarter.

Operating profit was $114.6 million, up 22.7% year over year, while margin expanded 120 bps to 10.6%. The margin benefitted from improved sales volume, Carlisle Operating System (“COS”) and price realizations. These were partially offset by inflation in raw material costs, high freight charges and labor costs.

Balance Sheet and Cash Flow

Exiting the fourth quarter of 2018, Carlisle had cash and cash equivalents of $803.6 million, reflecting 3% growth from $780.5 million recorded in the last reported quarter. Long-term debt was roughly flat at $1,587.8 million.

In 2018, Carlisle generated net cash of $339.2 million from operating activities, reflecting year-over-year decline of 26.1%. Capital expenditure totaled $120.7 million, down roughly 24.5% from $159.9 million recorded in the previous year.

During the year, the company paid dividends totaling $93.5 million to shareholders and repurchased 4.4 million shares worth $459.8 million.

Outlook

For 2019, Carlisle anticipates gaining from stellar end-market demand and business moves (taken in 2018) that aim at supporting the company's Vision 2025. Revenues in the year are predicted to grow in a high-single digit.

On a segmental basis, organic sales are anticipated to grow in a high-single to low-double-digit range for CCM, in a mid-single digit for CIT and CFT, and in a low-single digit for CBF.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -5.37% due to these changes.

VGM Scores

At this time, Carlisle has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Carlisle has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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