CSL - Embedded Expectations Analysis - 2020 12 09
Carlisle Companies Incorporated (CSL:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with an 18.3x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may be concerned about free cash flow conversion, reroofing growth, and their Carlisle Interconnect Technologies (CIT) business segmentSpecifically, management may lack confidence in their ability to improve free cash flow conversion, generate more cash, and continue increasing dividends every year. Moreover, they may be exaggerating their ability to have the lowest cost structure in the industry. Furthermore, they may lack confidence in their ability to sustain reroofing activity growth, and effectively execute on planned repurchases. Finally, management may be concerned about the Carlisle Interconnect Technologies (CIT) medical technologies business and their work from home arrangement
Carlisle Companies designs, manufactures and markets commercial roofing, energy, agriculture, mining, construction, aerospace and defense electronics, medical technology, transportation, among others. The company's segments are: Carlisle Construction Material, which provides ethylene propylene diene monomer rubber, thermoplastic polyolefin and polyvinyl chloride membrane and metal roofing systems; Carlisle Interconnect Technologies, which provides wire, cable, connectors, contacts and cable assemblies, and satellite communication equipment; Carlisle Fluid Technologies, which provides liquid, powder, sealants and adhesives finishing equipment and system components; and Carlisle Brake and Friction.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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