Forget cloud computing and Big Data.
Carlisle Cos. (
) makes things you can see or touch: commercial roofing,
specialty tires, farm-machinery brakes, food service
Those and other niche products added up to more than $3.2
billion in sales last year.
With commercial replacement roofs taking off, 2012 got off to
an even stronger start.
This year could be a "breakout year for us, barring unexpected
economic conditions," CEO David Roberts told analysts after
first-quarter results were reported in late April.
In a phone interview this week, Roberts said: "If the economy
slows, obviously, everything would slow with it."
And that might put a damper on the company's target of
achieving a 15% operating margin by the end of 2014, up from 11%
in the first quarter and 8% last year.
"We would have to recalculate the target. At this point we
don't see that happening," he added.
Until recent dips as the market gyrated, shares have recently
been trading up ahead of second-quarter results, which will be
released on July 24.
"Investors are looking for companies that have limited
European exposure, very strong cash flow and a decent opportunity
for earnings growth," said Ivan Marcuse, a KeyBanc Capital
Markets analyst. "And this company fits all those molds."
"It's basically a North American-centric business," he
Based in Charlotte, N.C., Carlisle is a diversified
manufacturer, focused on niches it can dominate. It's either No.
1 or No. 2 in all five of its core businesses: construction
materials, transportation, brake and friction, interconnect
technologies and food service.
Since management decided four years ago to focus on business
lines with good scale and strong operating margins, it shed five
Carlisle's roots date to 1917, when founder Charles Moomy
opened Carlisle Tire and Rubber Co. to sell tire inner tubes to
It later expanded into brake shoes, insulated wire and cable,
aerospace and electronics and recreational tires, much of it
The firm remains on the lookout for acquisitions, especially
in construction materials, interconnect technologies and braking
and friction, Roberts says.
"Management is very good at finding businesses that have
strong fundamentals and market share in their categories," said
S&P Capital IQ analyst Stuart Benway.
In the 1970s, Carlisle was a pioneer in rubber roofing, now
part of its biggest business -- construction materials. It later
added thermoplastic polyolefin roofing material. Both are more
energy efficient than traditional asphalt.
Any flat-top commercial building is game for rubber or plastic
membranes. Think everything from a big-box retailer such asTarget
) andWal-Mart (
) to a school, convenience store or gas station.
"The last thing a business wants, especially a retailer, is a
leaky roof," said Marcuse, who says retail chains replace at
least some of their thousands of store roofs every year.
First-quarter revenue in construction materials grew 41% over
the prior year to $353.9 million, making up nearly 40% of the
Most of the gain was from re-roofing demand rather than new
construction. Higher prices also helped.
It might be North American-centric, but Carlisle has been
looking for new roofing customers in Europe, despite the region's
Carlisle recently acquired Hertalan, a Dutch manufacturer of
rubber roofing and industrial components, for $50 million.
With that purchase and another in Europe last year, Carlisle
is now one of the largest manufacturers of rubber roofing in
That is a small market in Europe since most roofs are still
asphalt. But Roberts said, "We're having good success in
Marcuse says the firm's roofing business in Europe is a
Sales from outside the U.S. made up about 20% of Carlisle's
total at the end of the first quarter, with about half of that
coming from Europe, Roberts says. Management intends to keep
growing its international footprint.
With 2010's acquisition of Cleveland-based Hawk Corp.,
Carlisle gained greater exposure to China, Brazil and India. Hawk
makes brake and friction materials and parts that go into
performance autos, trucks and big earthmoving and mining
) and to a lesser extent,Deere & Co. (
), are customers for Carlisle's brakes and friction
products.Boeing (BA) and other aerospace makers are customers for
Carlisle expects to see double-digit growth this year in
interconnect technologies, which include wire and cable sales to
the aerospace industry for avionics systems and in-flight
entertainment and communications.
"Every manufacturer of airplanes uses some of our wires
somewhere in their planes," Roberts said.
Though interconnect is one of the smallest of Carlisle's
business units, sales in the first quarter soared 68% over last
year to $110.7 million.
Marcuse says old planes are being retrofitted with in-flight
entertainment. And new planes, such as Boeing's Dreamliner, use
Carlisle's wires for those systems as well.
Boeing's strong backlog "is a positive for Carlisle's
interconnect technology business," Marcuse said.
Sales in brake and friction products were especially strong in
agriculture and to a lesser degree, mining and construction.
Quarterly sales grew 12% to $133.9 million.
Specialty tires are part of Carlisle's transportation segment,
which saw first-quarter sales rise 15% to $231.5 million.
Standouts were sales to the agricultural industry, tires for
giant crop seeders, for example.
The slowest-growing unit, food service, is also Carlisle's
smallest. Sales in the quarter rose 4.6% to $59.3 million. Higher
raw-material costs also ate into margins.
Still, it wasn't enough to keep down overall earnings, which
jumped 77% to 94 cents a share, thanks in part to management's
focus on operational efficiencies. Revenue in the quarter rose
28% to $889.3 million.
Analysts expect 2012 earnings to rise 48% over last year to
$4.25 a share, reports Thomson Reuters.
Carlisle is not immune to general economic weakness.
"If the economy slows, industrial companies tend to be
negatively impacted by a slowdown in demand," Marcuse said.
On July 8, he downgraded Carlisle to "hold" from "buy" on
possible softening demand in roofing. He said that "in the
current environment, some caution should be considered."
"But if you're a North American-centric industrial company,
business is probably not too bad right now," he said.