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Carlisle (CSL) Down 2% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
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It has been about a month since the last earnings report for Carlisle (CSL). Shares have lost about 2% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Carlisle due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Carlisle Q1 Earnings & Revenues Top Estimates, Up Y/Y

Carlisle reported better-than-expected first-quarter 2019 results, delivering a positive earnings surprise of 27%.

The company’s adjusted earnings for the reported quarter were $1.41 per share, surpassing the Zacks Consensus Estimate of $1.11. Also, the bottom line increased 39.6% from the year-ago quarter’s figure of $1.01.

Inside the Headlines

In the reported quarter, Carlisle’s net sales were $1,071.9 million, up 8.9% year over year. The improvement was driven by a 5.9% contribution from organic sales growth and 3.9% benefit from acquired assets, partially offset by 0.9% adverse impact of foreign currency translation.

The top line surpassed the Zacks Consensus Estimate of $1,041 million.

The company reports results under four segments —CCM, CIT, CFT, and CBF. The quarterly segmental results are briefly discussed below:

Revenues from CCM totaled $671.1 million, increasing 12.1% year over year. It represented 62.6% of net sales. Organic sales and acquired assets both had a positive impact of 6.3%. These were partially offset by 0.5% adverse impact of forex woes.

CIT revenues, representing 23% of net sales, were $246.4 million, up 9.9% year over year. The improvement was driven by 10% growth in organic sales and 0.2% benefit from acquired assets, partially offset by 0.3% adverse impact of unfavorable movements in foreign currencies.

CFT revenues, representing 5.9% of net sales, were $63.1 million, down 0.6% year over year. In the reported quarter, organic sales grew 2.2% while forex woes had an adverse 2.8% impact.

CBF revenues were $91.3 million, decreasing 7.1% year over year. It represented 8.5% of net sales in the quarter under review. Organic sales declined 3.8% while unfavorable movements in foreign currencies had a 3.3% adverse impact.

Operating Margin

In the reported quarter, Carlisle’s cost of sales grew 6.5% year over year to $783.3 million. It represented 71.7% of net sales versus 74.7% recorded in the year-ago quarter.

Selling and administrative expenses grew 10.5% to $164.2 million. It represented 15.3% of net sales versus 15.1% in the year-ago quarter. Research and development expenses totaled $14.4 million compared with $13.9 million a year ago.

Operating profit was $114.7 million, up 21.1% year over year, while margin expanded 110 basis points to 10.7%. Margin benefited from improved sales volume, COS and price realizations. These were partially offset by labor costs and unfavorable mix.

Balance Sheet and Cash Flow

Exiting the first quarter of 2019, Carlisle had cash and cash equivalents of $516.6 million compared with $803.6 million recorded as of Dec 31, 2018. Long-term debt was roughly flat at $1,588.5 million.

Outlook

For 2019, Carlisle expects that stellar end-market demand and pricing actions will continue to drive its revenues. Execution of COS, improved top-line performance and acquisition benefits will likely boost its near-term profitability.

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

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Carlisle has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise 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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