Boring Portfolio

Earnings! Earnings! Earnings!
... Carlisle, Pentair, and Andrew
By Greg Markus
(TMF Boring)

ANN ARBOR, Mich. (July 16, 1998) -- As noted in Wednesday evening's recap, three of our eight Boring companies reported their quarterly results this morning, with conference calls immediately following.

Carlisle Companies (NYSE: CSL) blew away analysts' sales and earnings forecasts, and it accomplished that despite a two-penny hit in EPS as a result of the General Motors (NYSE: GM) strike. Sales increased 17% over the year-ago period to $396 million. EPS increased 18% to $0.80 (diluted) versus $0.68. Both were all-time records for the company.

I'm still writing up my notes from the conference call and expect to post them soon. For now, suffice it to say that all three segments of Carlisle's business were solid, and looking ahead, the company's management sees no particular bump in the road that it can't negotiate.

Sales for Carlisle's construction materials segment increased 9% to $95.2 million. Despite margin pressures due to competitiveness in the marketplace and increased raw material costs, this segment continues to report strong gains in sales and earnings.

Transportation segment sales increased 11% to $154.7 million. Record market demand for the company's heavy friction products contributed to the favorable results. Carlisle's specialized trailer operations experienced continued strong demand, particularly in the construction markets, benefiting from increased spending on highway maintenance and repair across the U.S. Sales and earnings at the wire operations continue to be led by the sale of Carlisle's patented Tufflite wire to the aerospace industry. The perishable cargo container biz is solid, as well.

Sales for Carlisle's "General Industry" segment rose 32%, to $145.7 million. The increase was led by the company's tire and wheel operations, which continue to outperform 1997 results on increased volume to OEM and replacement customers serving the trailer, lawn and garden, and golf car markets.

Carlisle's stock gained $7/16 to $46 13/16.

The Borefolio's other diversified manufacturer, Pentair (NYSE: PNR), also reported its quarterly results. Earnings increased 19% to $0.56, a penny above the consensus forecast. Sales increased 12%, to $472 million. The latter figure may have been a tad below what some folks were expecting, but nothing major.

In last night's recap, I said that "Pentair has virtually no exposure to Southeast Asian markets, and so we'll see no 'surprise' in that regard from the Pentair folks in St. Paul, Minnesota." Well, I was half right.

Pentair does indeed have very little direct exposure to Southeast Asia. Pentair's electrical enclosures operations do a lot of business with companies that sell products in that part of the world, however, and sales in the enclosures group were down slightly.

In contrast, sales in Pentair's pump group were strong, due in part to flooding in the Midwest this spring, which prompted homeowners to head out to the Home Depot (NYSE: HD) and pick up a sump pump. The company's professional tools and equipment group also enjoyed a strong quarter, led by robust sales of the Porter-Cable "Bammer" air-powered nailer.

I invite you to click over to our summary of Pentair's conference call for details. Pentair's stock eased $1/16 to $41 1/8.

Last up, Andrew Corp. (Nasdaq: ANDW) reported earnings of $0.28 per share, in line with the company's downward guidance issued last month. Sales were a bit better than expected, at $204 million -- down 2% over last year.

Overall, growth in Latin America, China, and South Africa was offset by a sharp decline in Southeast Asian business and slightly lower U.S. wireless infrastructure and land mobile revenues. European business increased slightly for Andrew.

All was not gloomy, however. The company reported that PCS infrastructure orders increased 33% over the year-ago period to $36 million -- the first uptick in orders that Andrew has seen in the past five quarters. The company continues to see excellent growth in China, as well.

In Latin America, Andrew expects the wireless infrastructure build-out to increase considerably in the next 12 to 24 months, that will require an enhancement of that region's long-haul network, as well. Andrew is well-positioned with its facility in Brazil. The company has seen only a few million dollars in sales in the past quarter for b-band infrastructure expansion in Brazil, as that is just getting under way. As the privatization of Telebras (NYSE: TBR) occurs, the expectation is that a significant upgrade of the infrastructure will take place. Prospects in Mexico are also bright.

In the U.S., Andrew is beginning to see orders associated with the development of digital television, and that could be a bright spot in coming quarters.

That's the good news. The not-so-good news is that pricing pressure continues to crimp profits in Andrew's dominant coaxial cable business. If sales volume picks up, that could improve margins; but barring a noticeable uptick, margins could continue to see some pressure, at least for the next quarter or so.

The September quarter is traditionally Andrew's strongest, and management expects that to continue this year. The company expects to see sequential growth, but the results will perhaps not equal the levels of last year's fourth quarter.

Andrew's stock rose a 'teenth to $18.

Look for our summary of Andrew's conference call later this evening in The Motley Fool's "Conference Call" section. (Makes sense, huh?)

FoolWatch -- It's what's going on at the Fool today.

07/16/98 Close

Stock  Change    Bid 
 ANDW  +  1/16  18.00 
 CGO   +  7/16  36.44 
 BGP   +  1/8   38.50 
 CSL   +  7/16  46.81 
 CSCO  +  1/4   95.75 
 FCH   -  1/16  31.06 
 PNR   -  1/16  41.13 
 TBY   -  1/8   8.88 
                   Day   Month    Year  History 
         BORING   +0.27%   3.03%   7.44%  35.19% 
         S&P:     +0.78%   4.42%  22.01%  90.47% 
         NASDAQ:  +0.30%   5.58%  27.39%  92.18% 
     Rec'd   #  Security     In At       Now    Change 
   2/28/96  400 Borders Gr    11.26     38.50   242.03% 
   6/26/96  150 Cisco Syst    35.93     95.75   166.47% 
   8/13/96  200 Carlisle C    26.32     46.81    77.83% 
    3/5/97  150 Atlas Air     23.06     36.44    58.02% 
   4/14/98  100 Pentair       43.74     41.13    -5.98% 
   5/20/98  400 TCBY Enter    10.05      8.88   -11.65% 
   11/6/97  200 FelCor Sui    37.59     31.06   -17.36% 
   1/21/98  200 Andrew Cor    26.09     18.00   -31.01% 
     Rec'd   #  Security     In At     Value    Change 
   2/28/96  400 Borders Gr  4502.49  15400.00 $10897.51 
   6/26/96  150 Cisco Syst  5389.99  14362.50  $8972.51 
   8/13/96  200 Carlisle C  5264.99   9362.50  $4097.51 
    3/5/97  150 Atlas Air   3458.74   5465.63  $2006.89 
   4/14/98  100 Pentair     4374.25   4112.50  -$261.75 
   5/20/98  400 TCBY Enter  4018.00   3550.00  -$468.00 
   11/6/97  200 FelCor Sui  7518.00   6212.50 -$1305.50 
   1/21/98  200 Andrew Cor  5218.00   3600.00 -$1618.00 
                              CASH   $5528.69 
                             TOTAL  $67594.32