Reasons Why You Should Avoid Investing in Carlisle (CSL) Now
Carlisle Companies Incorporated CSL has failed to impress investors with its recent operational performance due to persistent supply-chain constraints, raw material cost inflation and foreign-currency headwinds. These factors may impede its earnings in the near term.
Let’s discuss the factors that may continue taking a toll on the firm.
Steep Costs and Expenses, and Supply-Chain Constraints: Cost inflation poses a threat to Carlisle as it has been dealing with the impacts of the high cost of sales and operating expenses. In 2022, its cost of sales recorded a year-over-year increase of 26.9%, whereas its selling, general and administrative expenses jumped 16.2%. CSL persistently faces supply-chain constraints, inflation in raw material prices and labor challenges. Escalation in costs and operating expenses, if not controlled, can severely affect margins and profitability in the quarters ahead.
High Debt Level: Carlisle's long-term debt in the last five years (2018-2022) witnessed a CAGR of 7.5%. Its long-term debt balance (excluding the current portion) at the end of fourth-quarter 2022 was high at $2,281.5 million. Also, its net interest expenses jumped 7% on a year-over-year basis in the fourth quarter. The company expects to incur net interest expenses of $65 million in 2023. Any further increase in the debt levels can raise the company's financial obligations.
Forex Woes: Given its strong international presence, Carlisle's financial performance is subject to various risks, including the interest rate and currency exchange rate fluctuations, as well as the economic conditions of the places it operates in. Forex woes had a negative impact of 1.1% on sales in fourth-quarter 2022.
Southbound Estimate Trend: In the past 60 days, the Zacks Consensus Estimate for 2023 earnings has been revised 4.5% downward.
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Due to these headwinds, shares of Carlisle have lost 28.2% against the industry’s 4.5% growth over the past six months.
Zacks Rank and Stocks to Consider
CSL currently carries a Zacks Rank #4 (Sell). Some better-ranked companies are discussed below.
Deere & Company DE presently sports a Zacks Rank #1 (Strong Buy). DE’s earnings surprise in the last four quarters was 4.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
In the past 60 days, estimates for Deere & Company’s fiscal 2023 earnings have increased 8.6%. The stock has rallied 3.7% in the past six months.
Alamo Group Inc. ALG presently flaunts a Zacks Rank of 1. ALG’s earnings surprise in the last four quarters was 6.0%, on average.
In the past 60 days, estimates for Alamo’s fiscal 2023 earnings have increased 7.5%. The stock has gained 26.7% in the past six months.
A. O. Smith Corporation AOS presently carries a Zacks Rank #2 (Buy). AOS’ earnings surprise in the last four quarters was 3.2%, on average.
In the past 60 days, estimates for A. O. Smith’s fiscal 2023 earnings have increased 1.2%. The stock has gained 34.2% in the past six months.
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Deere & Company (DE) : Free Stock Analysis Report
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
Carlisle Companies Incorporated (CSL) : Free Stock Analysis Report
Alamo Group, Inc. (ALG) : Free Stock Analysis Report
