Citi Upgrades Carlisle Companies To Hold & Raises PT to $39

It appears to Citi that the worst of the late-cycle roofing and raw material headwinds are now mostly discounted in Carlisle's CSL shares. Resiliency in re-roofing, potential bottoming in the ABI index, and signs that some roofing price increases are sticking all support Citi's upgrade thesis. In addition, the recently closed $413 mil acquisition of Hawk looks to be accretive by at least $0.15 in 2011, or 6%. Importantly, this transaction marks an important shift by chairman & CEO Dave Roberts and team from playing defense with restructuring/divestitures to playing offense with the synergistic Hawk deal, which bolsters Carlisle's business mix and geographic reach in off-road braking systems. Citi is upgrading CSL shares to Hold from Sell, and increasing 2011/2012 EPS estimates from $2.60 to $2.75 and from $2.95 to $3.30, and target price by $10 to $39. CSL's risk-reward appears more evenly balanced with firming re- roofing trends and the accretion/synergy upside potential from the Hawk deal, which we believe should help offset late-cycle nonresi and raw material pressures. CSL closed Friday at $38.28