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Carlisle (CSL) Exhibits Strong Prospects, Risks Persist

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·3 min read
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Carlisle Companies Incorporated CSL stands to gain from its presence in diverse end markets, which allows it to neutralize risks associated with a single market with strength across others. Solid U.S. reroofing market, along with growing small to medium-sized reroofing market in Europe, is likely to benefit it over time. In addition, strength in medical end markets and the company’s initiatives to enhance capabilities at the medical technologies platform are likely to drive its performance.

Also, the company believes in strengthening its businesses through addition of assets. The acquisition of Providien (November 2019) boosted its medical technologies business. Also, the Ecco Finishing buyout (July 2019) added value to the Sealants and Adhesives business. In addition, the Petersen acquisition (January 2019) expanded its product offerings in the metal roofing platform. Notably, acquisitions had a contribution of 1.4% and 0.4% to revenue growth in fourth-quarter 2020 and first-quarter 2021, respectively.

In addition, it focuses on rewarding shareholders through dividend payments and share repurchases. In first-quarter 2021, Carlisle used $28.4 million for paying out dividends and repurchasing shares worth $150 million. The quarterly dividend rate was hiked by 5% in August 2020.

However, persistent weakness in the commercial aerospace end market owing to lower global air transport operations amid the coronavirus outbreak might weigh on its top-line performance in the near term.

Further, the company’s high-debt profile poses a concern. In the last five years (2016-2020), its long-term debt rose 28.4% (CAGR). Notably, its long-term debt balance (including current portion) was $2,082.2 million at the end of first-quarter 2021, reflecting a marginal increase on sequential basis. Any further increase in debt levels can raise the company’s financial obligations.

In the past three months, this Zacks Rank #3 (Hold) stock has returned 30% compared with the industry’s growth of 11.7%.

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Zacks Investment Research

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Key Picks

Some better-ranked stocks from the same space are Griffon Corporation GFF, ITT Inc. ITT and Macquarie Infrastructure Company MIC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Griffon delivered an earnings surprise of 50.00% in the last reported quarter.

ITT delivered an earnings surprise of 21.84% in the last reported quarter.

Macquarie delivered an earnings surprise of 25.00% in the last reported quarter.

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