This Carlisle companies review was recommend by a listener on our Podcast. Since its founding in 1917, Carlisle Companies (CSL) has evolved into a diverse industrial powerhouse, making its mark across various niche markets. From construction materials like roofing and waterproofing to advanced interconnecting technologies and fluid systems, Carlisle’s broad portfolio has been key to its enduring success, even through multiple economic ups and downs.
Carlisle Companies Review 2023
Carlisle Companies Review of 2023 shows it was a challenging year for Carlisle. The company reported a 15.8% drop in revenue, sliding to $4.59 billion from $5.45 billion in 2022. The decline was mainly due to softer sales in both non-residential and residential construction markets, which were hit hard by higher interest rates, project delays, and a wave of distributor destocking. But here’s the silver lining: despite these headwinds, Carlisle managed to bump up its gross margin to 35.6%, up from 34.2% the previous year. This improvement was thanks to some operational efficiencies which helped soften the blow of lower sales volumes.
Operating income took a hit, dropping 18.4% to $982.8 million. The operating margin also narrowed slightly to 21.4% from 22.1% in 2022. Yet, Carlisle’s focus on cost-saving measures and the successful integration of acquisitions helped cushion the impact, keeping the company on solid ground.
A Rock-Solid Balance Sheet
Carlisle’s balance sheet remains strong. At the close of 2023, total assets stood at $6.62 billion, slightly down from $7.22 billion the previous year. This dip reflects the company’s divestiture of non-core businesses and a deliberate reduction in long-term debt, which was trimmed down to $2.29 billion from $2.58 billion.
Shareholder equity came in at $2.83 billion, a modest decrease from $3.02 billion in 2022. Even with this slight dip, Carlisle’s debt-to-equity ratio improved to 0.81 from 0.85, showing a stronger, more resilient financial position. The reduction in debt, paired with steady profitability sets the stage for future growth.
Strong Cash Flows and Strategic Investments
Cash is king, and Carlisle knows it. In 2023, the company generated $1.06 billion in operating cash flow. Although this was a tad lower than 2022’s $1.08 billion, it’s a testament to Carlisle’s ability to generate cash even in tough times. This cash flow is critical—it not only keeps the lights on but also fuels dividends, share buybacks, and investments.
Speaking of investments, Carlisle ramped up its capital expenditures in 2023, channelling funds into growth initiatives like upgrading facilities and expanding production capacity. Despite these higher outlays, Carlisle maintained a healthy free cash flow, which supported $900 million in share repurchases and $160.3 million in dividend payments. Impressively, 2023 marked the 47th consecutive year of dividend increases—a clear sign of Carlisle’s commitment to its shareholders.
Looking Ahead: Growth and Dividends
Carlisle has a proven track record of navigating economic turbulence. From 2009 to 2019, the company averaged a 15% annual earnings growth, showing its ability to thrive even after downturns like the 2008 financial crisis.
The company’s strategy of optimizing its portfolio through targeted mergers and acquisitions has been a key driver of this growth. By shedding slower-growth units and focusing on high-potential segments like Brake & Friction, Carlisle is well-positioned for continued expansion. The acquisition of Henry Company for $1.6 billion, for example, significantly bolstered Carlisle’s construction materials segment.
But growth isn’t just about expansion—it’s about returning value to shareholders. Carlisle’s consistent share buybacks, ranging from $500 million to $1 billion annually, have been a major factor in boosting earnings per share. Even during challenging periods, like the 2020 pandemic, Carlisle maintained its commitment to these buybacks, which continue to play a crucial role in enhancing shareholder value.
Dividends: A Legacy of Growth
In 2023, the company upped its dividend payout to $3.40 per share, a 13.3% increase from the previous year’s $3.00 per share. This marks nearly half a century—47 years—of uninterrupted dividend growth.
Despite economic challenges and a dip in net income from $924 million in 2022 to $767.4 million in 2023, Carlisle’s dividend policy remains rock solid. The company’s low payout ratio ensures that dividends are well-covered by earnings, allowing Carlisle to sustain and grow its dividend while continuing to invest in the business and reward shareholders through buybacks.
Conclusion
Carlisle Companies is an interesting prospect. The boast a rock solid balance sheet, 47 years of dividend increases and a 5 year dividend CAGR of 17.32%. The only issue is valuation. The company share price has soared from under $250 dollars in October 2023 to over $400. This leaves the company with a starting yield of 1% which is below the 2.75% we require. One for the watchlist when we see some weakness in the construction sector.
