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Carlisle (CSL) to Buy MicroConnex, Enhance CIT Segment

Zacks Equity Research

Carlisle Companies Incorporated CSL recently announced that it is acquiring Snoqualmie, WA-based MicroConnex. Notably, the acquired company will be integrated with Carlisle Interconnect Technologies (“CIT”) segment and will complement the acquirer’s Medical Technologies platform. The terms of the deal were kept under wraps.

MicroConnex is engaged in production of engineered microminiature flex circuits and sensors, serving the Test & Measurement and Medical markets. The company’s major manufacturing processes comprise laser ablation, thin-film sputtering and precision laser micromachining.

Acquisition Rationale

The acquisition complements Carlisle’s buyout of redgroup in July 2018. Notably, the move will support the company’s medical strategy and augments major sensor and miniaturization technology to its Medical Technologies platform. This will also allow Carlisle to take part early in design and development activities at key medical original equipment manufacturers. As a matter of fact, MicroConnex’s leading technical proficiency and process capabilities will help in boosting the company’s growth opportunities in CIT’s Test & Measurement platform.

Carlisle’s Expansion Plans

Carlisle intends to pursue growth and expansion of core business through acquisition of companies or assets that aid growth of its service offerings. In this regard, the company’s buyout of Petersen Aluminum Corporation (January 2019) is worth mentioning. The acquisition will expand the company’s product offerings in the metal roofing platform.

Further, this will enable Carlisle to easily penetrate the markets of Arizona, Texas, the Midwest and Georgia. Notably, acquisitions had a contribution of 4.3% of sales growth in the fourth quarter of 2018.

Our Take

Carlisle has been gaining from its diversified business structure, which enables it to tap opportunities and neutralize operating risks associated with a single market. Of late, one of the company's major segments, Carlisle Construction Materials, has been witnessing significant improvement on account of solid demand in the North American non-residential construction markets and continued progress on price realization.

In the past three months, this Zacks Rank #1 (Strong Buy) company has gained 24.1%, outperforming the industry’s growth of 19.5%.

In light of the continued operational improvements, including cost savings from the Carlisle Operating System and overall positive market conditions, the company anticipates overall revenue growth to be in the high single-digit for 2019.

Other Key Picks

Other top-ranked stocks in the same space include Federal Signal Corporation FSS, United Technologies Corporation UTX and Macquarie Infrastructure Company MIC. All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Federal Signal surpassed estimates in each of the trailing four quarters, the average being 21.65%.

United Technologies exceeded estimates in each of the trailing four quarters, the average being 14.87%.

Macquarie surpassed estimates twice in the trailing four quarters, the average being 0.51%.

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