It has been about a month since the last earnings report for Carlisle (CSL). Shares have added about 3.2% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Carlisle Q3 Earnings Surpass Estimates, Revenues Miss
Carlisle reported mixed third-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.
The company’s adjusted earnings came in at $2.42 per share, surpassing the Zacks Consensus Estimate of $2.29. Also, the bottom line increased 44% from the year-ago quarter figure of $1.68.
Inside the Headlines
In the reported quarter, Carlisle’s net sales were $1,280.6 million, up 8.4% year over year. The improvement was driven by 3.4% contribution from organic sales growth and 5.4% benefit from acquired assets, partially offset by 0.4% adverse impact of foreign currency translation.
The top line missed the Zacks Consensus Estimate of $1,295 million.
The company reports results under four segments — Carlisle Construction Materials (“CCM”), Carlisle Interconnect Technologies (“CIT”), Carlisle Fluid Technologies (“CFT”), and Carlisle Brake & Friction (“CBF”). The quarterly segmental results are briefly discussed below:
Revenues from CCM totaled $893.5 million, increasing 15% year over year. It represented 69.8% of net sales. Organic sales and acquired assets had a positive impact of 8.8% and 6.5%, respectively. These were partially offset by 0.3% adverse impact of forex woes.
CIT revenues, representing 18.9% of net sales, were $241.9 million, up 0.7% year over year. The improvement was driven 1.5% benefit from acquired assets, partially offset by 0.7% decline in organic sales and 0.1% adverse impact of unfavorable movements in foreign currencies.
CFT revenues, representing 5.3% of net sales, were $68.5 million, down 5.4% year over year. In the third quarter, organic sales declined 17.1% while forex woes had an adverse 1.1% impact. However, acquired assets had a positive impact of 12.8% on sales.
CBF revenues were $76.7 million, decreasing 16.6% year over year. It represented 6% of net sales. Organic sales declined 15% while unfavorable movements in foreign currencies had a 1.6% adverse impact.
Operating Margin Improves Y/Y
In the reported quarter, Carlisle’s cost of sales jumped 3.8% year over year to $900.4 million. It represented 70.3% of net sales compared with 73.4% a year ago.
Selling and administrative expenses increased 6.2% to $175 million. It represented 13.7% of net sales compared with 13.9% in the year-ago quarter. R&D expenses totaled $15.2 million, up from $12.3 million.
Operating profit was $191 million, up 36.4% year over year, while margin expanded 300 basis points to 14.9%. Margin benefited from improved sales volume, Carlisle Operating System and price realizations. These were partially offset by wage inflation and higher raw material costs.
Balance Sheet and Cash Flow
Exiting the third quarter, Carlisle had cash and cash equivalents of $658.1 million compared with $803.6 million recorded on Dec 31, 2018. Long-term debt was $1,590.2 million compared with $1,587.8 million at the end of 2018.
For 2019, on a segmental basis, sales are anticipated to grow in low-double digit range for CCM, in a mid-single digit range for CIT. However, for CFT, the company expects sales to be down in low-to-mid single digit range. For CBF, the company expects sales to be down in low double digits range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
Currently, Carlisle has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Carlisle has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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