Building envelope solutions provider Carlisle Companies (NYSE:CSL) fell short of the market’s revenue expectations in Q3 CY2024, but sales rose 5.9% year on year to $1.33 billion. Its non-GAAP profit of $5.78 per share wasin line with analysts’ consensus estimates.
Revenue: $1.33 billion vs analyst estimates of $1.38 billion (3.3% miss)
Adjusted EPS: $5.78 vs analyst expectations of $5.82 (in line)
EBITDA: $367.9 million vs analyst estimates of $383.1 million (4% miss)
Gross Margin (GAAP): 38.6%, up from 37% in the same quarter last year
Operating Margin: 23.7%, in line with the same quarter last year
EBITDA Margin: 27.6%, in line with the same quarter last year
Free Cash Flow Margin: 22%, down from 28.6% in the same quarter last year
Organic Revenue rose 2.9% year on year (-16.1% in the same quarter last year)
Market Capitalization: $21.16 billion
Company Overview
Originally founded as Carlisle Tire and Rubber Company, Carlisle Companies (NYSE:CSL) is a multi-industry product manufacturer focusing on construction materials and weatherproofing technologies.
Building Materials
Traditionally, building materials companies have built competitive advantages with economies of scale, brand recognition, and strong relationships with builders and contractors. More recently, advances to address labor availability and job site productivity have spurred innovation. Additionally, companies in the space that can produce more energy-efficient materials have opportunities to take share. However, these companies are at the whim of construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of building materials companies.
Sales Growth
Examining a company’s long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Carlisle’s 1.1% annualized revenue growth over the last five years was weak. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Carlisle Total Revenue
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Carlisle’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 6.1% annually.
Carlisle Year-On-Year Organic Revenue Growth
Carlisle also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations because they don’t accurately reflect its fundamentals. Over the last two years, Carlisle’s organic revenue averaged 1.5% year-on-year declines. Because this number is better than its normal revenue growth, we can see that some mixture of divestitures and foreign exchange rates dampened its headline performance.
This quarter, Carlisle’s revenue grew 5.9% year on year to $1.33 billion, missing Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 6.4% over the next 12 months, an acceleration versus the last two years. While this projection illustrates the market believes its newer products and services will spur better performance, it is still below the sector average.
Carlisle has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 17.9%.
Looking at the trend in its profitability, Carlisle’s annual operating margin rose by 11.5 percentage points over the last five years, showing its efficiency has meaningfully improved.
Carlisle Operating Margin (GAAP)
This quarter, Carlisle generated an operating profit margin of 23.7%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
We track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth was profitable.
Carlisle’s EPS grew at a spectacular 17.4% compounded annual growth rate over the last five years, higher than its 1.1% annualized revenue growth. This tells us the company became more profitable as it expanded.
Carlisle Trailing 12-Month EPS (Non-GAAP)
Carlisle Diluted Shares Outstanding
Diving into the nuances of Carlisle’s earnings can give us a better understanding of its performance. As we mentioned earlier, Carlisle’s operating margin was flat this quarter but expanded by 11.5 percentage points over the last five years. On top of that, its share count shrank by 18.8%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For Carlisle, its two-year annual EPS growth of 5.4% was lower than its five-year trend. We hope its growth can accelerate in the future.
In Q3, Carlisle reported EPS at $5.78, up from $4.69 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Carlisle’s full-year EPS of $19.94 to grow by 12.5%.
Key Takeaways from Carlisle’s Q3 Results
We struggled to find many strong positives in these results. Its revenue unfortunately missed and its organic revenue fell short Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 8.4% to $420 immediately after reporting.
Carlisle’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
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