Why Is Carlisle (CSL) Down 10.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Carlisle (CSL). Shares have lost about 10.4% 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 the most recent earnings report in order to get a better handle on the important drivers.

Carlisle Q4 Earnings & Revenues Surpass Estimates

Carlisle reported strong fourth-quarter 2019 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

The company’s adjusted earnings came in at $1.78 per share, topping the consensus estimate of $1.58. Also, the bottom line increased 21% on a year-over-year basis.

In 2019, the company’s adjusted earnings were $8.21 per share, up 39.6% from 2018.

Inside the Headlines

In the reported quarter, Carlisle’s net sales were $1,144.3 million, up 6.2% year over year. The improvement was driven by 6.4% benefit from acquired assets, partially offset by 0.2% adverse impact of foreign currency translation.

The top line beat the Zacks Consensus Estimate of $1,132 million.

In 2019, Carlisle generated net sales of $4,811.6 million, up 7.4% on a year-over-year basis.

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 $753.7 million, increasing 11.4% year over year. It represented 65.9% of net sales. Organic sales had a positive impact of 5.1% on revenues, backed by strong demand for commercial roofing products and new products.

CIT revenues, representing 20.9% of net sales, were $239.2 million, up 3.3% year over year. The improvement was driven by benefits from acquired assets and strength in commercial aerospace and medical markets, partially offset by 3.1% decline in organic sales.

CFT revenues, representing 6.9% of net sales, were $79.5 million, down 3.5% year over year. In the fourth quarter, organic sales declined 16.1% on account of lower sales volume, particularly in the general industrial and automotive sectors, particularly in China.

CBF revenues were $71.9 million, decreasing 17.4% year over year. It represented 6.3% of net sales. Organic sales declined 16.6% and unfavorable movements in foreign currencies had an adverse impact.

Operating Margin Improves Y/Y

In the reported quarter, Carlisle’s cost of sales jumped 4.6% to $835.6 million. It represented 73% of net sales compared with 74.1% a year ago.

Selling and administrative expenses increased 2.3% to $155.6 million. It represented 13.6% of net sales compared with 14.1% in the year-ago quarter. R&D expenses totaled $15.9 million, up from $14.7 million.

Operating profit was $141.3 million, up 23.3% year over year, while margin expanded 170 basis points to 12.3%. 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 fourth quarter, Carlisle had cash and cash equivalents of $351.2 million compared with $803.6 million recorded on Dec 31, 2018. Long-term debt was $1,591.6 million compared with $1,587.8 million at the end of 2018.

In 2019, the company generated net cash of $703.1 million from operating activities, compared with $339.2 million in 2018.

Outlook

For 2020, on a segmental basis, sales are anticipated to grow in mid-single digit range for CCM, in a high-single digit range for CIT. For CFT, the company expects sales to be up in low-to-mid single digit range. However, for CBF, it expects sales to be down in the mid-single digits range.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -12.96% due to these changes.

VGM Scores

At this time, Carlisle has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. 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

Carlisle has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.