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Reasons Why You Should Avoid Betting on Carlisle (CSL) Now

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Carlisle Companies Incorporated (CSL - Free Report) has failed to impress investors with its recent operational performance due to the challenging end-market conditions amid the coronavirus outbreak.

The Zacks Rank #4 (Sell) company has a market capitalization of $6.5 billion. In the past six months, the stock has lost 25.7% compared with the industry’s decline of 15.7%.

 


 

Let’s delve into the factors that might continue to take a toll on the firm.

Low Demand Environment: Carlisle has been experiencing a weak demand environment in most of its end-markets on account of the coronavirus outbreak. Persistent lower demand from its mining, agriculture and construction end markets remains concerning. Notably, the company expects the Fluid Technologies segment’s revenues to decline 20% in the second quarter. In addition, owing to the weakness in commercial aerospace end-markets, it anticipates revenues from its commercial aerospace business to decline up to 50% in the quarter. The company withdrew its revenue guidance for 2020 on end-market uncertainties, owing to the outbreak.

High Debt Level: The company’s highly leveraged balance sheet also remains concerning. Notably, in the last five years (2015-2019), its long-term debt increased 22.5% (CAGR). Notably, at the end of first-quarter 2020, the metric surged 61.9% to $2,577.3 million from the 2019-end level. Also, its total debt-to-total capital stood at 50.6% at the end of the first quarter compared with 37.6% in the previous quarter.

Forex Issues: Given its widespread presence in international markets, the company is exposed to geopolitical issues, macroeconomic challenges and unfavorable movements in foreign currencies. Notably, foreign exchange headwinds had an adverse impact of 0.2% and 0.3% on its sales in the fourth quarter of 2019 and the first quarter of 2020, respectively.

Estimate Trend: Further, in the past 60 days, analysts have increasingly become bearish on Carlisle, as evident from downward earnings estimate revisions. Notably, the Zacks Consensus Estimate for its 2020 earnings has trended down from $5.87 to $5.81 on one downward estimate revision versus none upward. In addition, over the same timeframe, the consensus estimate for 2021 earnings has trended down from $7.49 to $7.45.

Stocks to Consider

Some better-ranked stocks are Macquarie Infrastructure Company (MIC - Free Report) , Chart Industries, Inc. (GTLS - Free Report) and Ingersoll Rand Inc. (IR - Free Report) . While Macquarie currently sports a Zacks Rank #1 (Strong Buy), Chart Industries and Ingersoll carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Macquarie delivered a positive earnings surprise of 3.13%, on average, in the trailing four quarters.

Chart Industries delivered a positive earnings surprise of 1.41%, on average, in the trailing four quarters.

Ingersoll Rand delivered a positive earnings surprise of 3.47%, on average, in the trailing four quarters.

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