A month has gone by since the last earnings report for Carlisle (
CSL Quick Quote CSL - Free Report) . Shares have added about 2.7% 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 the most recent earnings report in order to get a better handle on the important drivers.
Carlisle Q2 Earnings & Revenues Surpass Estimates
Carlisle reported better-than-expected results in second-quarter 2020, wherein both earnings and revenues beat the Zacks Consensus Estimate.
The company’s adjusted earnings were $1.61 per share, beating the consensus estimate of $1.06. However, the bottom line declined 38.5% on a year-over-year basis on account of lower revenues. Inside the Headlines
In the reported quarter, Carlisle’s revenues were $1,024.2 million, down 22.1% year over year. The decline was attributable to a 23.8% fall in organic revenues and 0.2% adverse impact of foreign currency translation, partially offset by 1.9% benefit from acquired assets.
The top line surpassed the Zacks Consensus Estimate of $998 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 $734.9 million, decreasing 19.7% year over year. It represented 71.8% of the company’s revenues. Organic revenues declined 19.7% due to a decline in sales volume across most product categories. CIT revenues, representing 18% of total revenues, were $184 million, down 25% year over year. The decline was primarily attributable to a 33.5% decline in organic revenues on account of the significant order decline from Aerospace customers amid the coronavirus outbreak, partially offset by acquisitions and strength in the medical markets. CFT revenues, representing 4.5% of total revenues, were $46.5 million, down 30.9% year over year, reflecting negative impacts of the coronavirus outbreak. In the second quarter, organic revenues declined 34.2% on account of lower sales volume, particularly in the transportation and automotive refinish markets. CBF revenues were $58.8 million, decreasing 32.5% year over year. It represented 5.7% of revenues. Organic revenues in the quarter declined 31.1%. Softness in vehicle end markets and unfavorable movements in foreign currencies had an adverse impact. Operating Margin Details
In the reported quarter, Carlisle’s cost of sales declined 19.3% to $743 million. It represented 72.5% of net sales compared with 70% a year ago.
Selling and administrative expenses decreased 11.1% to $153.1 million. It represented 14.9% of net sales compared with 13.1% in the year-ago quarter. R&D expenses totaled $14.1 million, down 8.4% year over year. Operating profit was $113.4 million, down 45.3% year over year, while margin contracted 470 basis points to 11.1%. Margin was adversely impacted by lower sales volumes, wage inflation, higher raw material costs and higher restructuring costs. These were partially offset by benefits from Carlisle Operating System and lower expenses. Balance Sheet and Cash Flow
Exiting the second quarter, Carlisle had cash and cash equivalents of $737.7 million compared with $351.2 million recorded as of Dec 31, 2019. Long-term debt (including current portion) was $2,078.0 million compared with $1,591.6 million at the end of 2019.
In the first six months of 2020, the company generated net cash of $226.3 million from operating activities compared with $197.1 million in the year-ago comparable period. Outlook
On uncertainties, regarding the impacts of the coronavirus outbreak on financial and operating results, Carlisle has not provided its earnings and revenue guidance for 2020.
However, the company anticipates generating free cash flow conversion of more than 125% in 2020. For the year, Carlisle anticipates incurring capital expenditure of $100-110 million. Its net interest expenses are expected to be $75 million. How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -13.67% due to these changes.
At this time, Carlisle has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Carlisle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.