Why Is Carlisle (CSL) Down 2.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Carlisle (CSL). Shares have lost about 2.6% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Carlisle Q1 Earnings Beat Estimates, Revenues Miss
Carlisle reported mixed first-quarter 2020 results, wherein earnings beat the Zacks Consensus Estimate, while revenues lagged the same.
The company’s adjusted earnings were $1.29 per share, beating the consensus estimate of $1.01. However, the bottom line declined 8.5% on a year-over-year basis on account of lower revenues.
Top-Line Details
In the reported quarter, Carlisle’s revenues were $1,030.2 million, down 3.9% year over year. The decline was attributable to a 7% fall in organic revenues and a 0.3% adverse impact of foreign currency translation, partially offset by a 3.4% benefit from acquired assets.
The top line missed the Zacks Consensus Estimate of $1,043 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 $676.4 million, increasing 0.8% year over year. It represented 65.7% of revenues. Organic revenues had a positive impact of 0.7% on revenues, backed by persistent strong demand for commercial roofing products and new products as well as architectural metals platform growth.
CIT revenues, representing 21.8% of total revenues, were $224.5 million, down 8.9% year over year. The decline was primarily attributable to a 19.7% decline in organic revenues on account of the softness in commercial aerospace markets and the coronavirus outbreak, partially offset by strength in the medical markets.
CFT revenues, representing 5.7% of total revenues, were $58.3 million, down 7.6% year over year, reflecting negative impacts of the coronavirus outbreak. In the first quarter, organic revenues declined 18.8% on account of lower sales volume, particularly in the general industrial and automotive sectors.
CBF revenues were $71 million, decreasing 22.2% year over year. It represented 6.8% of revenues. Organic revenues in the quarter declined 20.8%. Also, coronavirus outbreak-related issues and unfavorable movements in foreign currencies had an adverse impact.
Operating Margin Details
In the reported quarter, Carlisle’s cost of sales declined 4% to $751.8 million. It represented 73% of net sales compared with 73.1% a year ago.
Selling and administrative expenses decreased 1.4% to $161.9 million. It represented 15.7% of net sales compared with 15.3% in the year-ago quarter. R&D expenses totaled $14.4 million, flat year over year.
Operating profit was $102.7 million, down 10.5% year over year, while margin contracted 70 basis points to 10%. Margin was adversely impacted by lower sales volumes, wage inflation and higher raw material costs. These were partially offset by benefits from Carlisle Operating System, price realizations and lower expenses.
Balance Sheet and Cash Flow
Exiting the first quarter, Carlisle had cash and cash equivalents of $1,187.7 million compared with $351.2 million recorded as of Dec 31, 2019. Long-term debt was $2,577.3 million compared with $1,591.6 million at the end of 2019.
In the first three months of 2020, the company generated net cash of $53.2 million from operating activities compared with $109.8 million in the year-ago comparable period.
Outlook
On uncertainties, regarding the impacts of the coronavirus outbreak on financial and operating results, Carlisle has now withdrawn its revenue guidance for 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -55.14% due to these changes.
VGM Scores
Currently, Carlisle has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Carlisle has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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