CARLISLE COMPANIES INC (CSL) stock intrinsic value fair value estimate & owner earnings analysis

Carlisle is a building-envelope manufacturer focused on North America. Its largest segment, Carlisle Construction Materials, makes EPDM and TPO commercial roofing membranes, roofing accessories and insulation, and was about three-quarters of 2025 revenue of $5.02 billion. The rest is Carlisle Weatherproofing Technologies (CWT), which makes waterproofing and air/vapor barriers, sealants, roof coatings, spray foam and insulation ($1.30 billion of revenue in 2025). Management says roughly 70% of its commercial roofing business is re-roofing, which ties that demand to the existing stock of roofs rather than to new building alone. Two distributors matter a great deal: QXO (which bought Beacon Roofing Supply in April 2025) and ABC Supply accounted for about 16.7% and 16.3% of 2025 revenue. Earnings level. We measure owner earnings: operating cash flow, less the swing in working capital, less stock compensation, less the part of capital spending needed just to stay in business. Carlisle sold Carlisle Fluid Technologies in 2023 (about $511 million of proceeds) and Carlisle Interconnect Technologies in 2024 (about $2.0 billion), so we value only the retained building-products business and measure it from 2023. We set 2022 aside: revenue rose 42% that year (the company cites positive pricing across all Construction Materials product lines) and then fell 16% in 2023, and 2022 also carried a $165 million inventory build. On that basis owner earnings were about $777 million in 2023, $949 million in 2024 and $851 million in 2025. Adding back interest paid, and removing interest earned on cash (cash is counted separately below), the cash flow the business produces before its lenders was about $829 million, $959 million and $882 million. The middle figure, $882 million, is our normal level, and we value the business in dollars and divide by today's roughly 40.5 million diluted shares so that past buybacks do not inflate the per-share picture. Operating cash flow in 2025 was helped by a $106 million rise in other current liabilities, which we treated as timing and removed. Amortization of acquired intangibles ($122 million in 2025, with $1.43 billion of intangibles still on the balance sheet) is added back as a sunk cost; because the cases credit no growth, that wasting of acquired assets is carried in the flat growth path rather than in the earnings level. A cross-check built up from net income, depreciation and other non-cash items agreed with owner earnings within 5% in each of 2023 to 2025. Two limits: the share of working capital and stock compensation belonging to the sold units cannot be separated in the filings, and we could not isolate any tax payments tied to the 2024 interconnect sale. Recent trend. Owner earnings fell about 10% in 2025 (cash flow before lenders fell about 8%). Our first-year assumption is no change from the $882 million normal level, which is above that trailing rate, because the 2025 decline came from identifiable items that are already in the base: Construction Materials spent $56.3 million more on operating costs, mainly on what the filing calls the Carlisle Experience, and $8.7 million more on research, its operating margin fell to 26.8% from 29.3%, and CWT's operating margin fell to 7.8% from 13.4% while its volumes were lower on soft new construction. The first half of 2026 (Form 10-Q for June 30, 2026) shows stabilization rather than a further slide: revenue rose 3.0% to $2.62 billion (second quarter up 8.3%) and operating income rose 2.7% to $532.8 million. Income from continuing operations was $385 million against $396 million because interest expense rose to $55.7 million from $29.5 million after the August 2025 bond issue. Operating cash flow in that half was $197 million against $289 million; working-capital swings were larger than a year earlier, but we have not traced the whole gap. Debt. The company owes $2.9 billion of fixed-rate bonds: $600 million at 3.75% due December 2027, $750 million at 2.75% due March 2030, $550 million at 2.20% due March 2032, $500 million at 5.25% due September 2035 and $500 million at 5.55% due September 2040. It borrowed nothing under its $1.0 billion revolving credit facility in 2025, and held $665 million of cash at June 30, 2026; we treat $465 million of that as excess and net it against the debt. Because the 2027 to 2032 coupons are well below ordinary borrowing costs, the debt is cheaper to carry than its face amount, and we reduce what is owed by about $228 million for that. Net debt used in every case is therefore about $2.2 billion, or about $54 per share. Interest is about $109 million a year at current coupons. The bonds and credit agreement carry leverage and interest-coverage covenants (the required levels are not in the filing text we reviewed); the company complied at the end of 2025 and 2024. The three cases. Base case, $214.6 per share: the business is worth about $10.9 billion ($269 per share) and owes about $2.2 billion. Cash flow before lenders stays flat at $882 million for ten years and then fades about 3% a year for twenty more years, after which we credit nothing. What keeps it going is the re-roofing base described above; the fade reflects the wasting acquired intangibles and our decision to credit no price increases. About 40% of the base value arrives after year ten, and if nothing persisted beyond ten years the base would be about $106 per share. We credited no growth. Acquisitions were $24.7 million in 2022, $36.1 million in 2023 and $676.9 million in 2024 (MTL and PFB), which is too uneven to count as a steady program. Buybacks (about $4.3 billion from 2023 through the first half of 2026) reduce the share count but are not business growth. Margin recovery, new products and share gains were left out because nothing secured supports them. Bear case, $159.4 per share: the business is worth about $8.7 billion ($214 per share) and owes about $2.2 billion. Year one is $882 million; then a downturn deeper than the recent record: cash flow before lenders falls to $650 million in year two and $575 million in years three and four (about a third below normal), recovers to $650 million in year five and settles at $750 million (15% below normal) from year six to year ten, then fades 4% a year for twenty years. The pieces are named: in 2023 revenue fell 16% and cash flow before lenders fell 23% (from about $1,082 million to $829 million) in a single year; softer new construction already held back both segments in 2025; margins fell in both in 2025; and about a third of revenue runs through two distributors, one of which changed owner in 2025. This case carries its debt: even at the $575 million trough, cash flow covers the roughly $109 million interest bill about five times, and the first maturity, $600 million in December 2027, falls in the trough but is covered by cash on hand and the revolver. We added no penalty for expensive refinancing because nothing in the filings points to stressed borrowing terms. Bull case, $356.1 per share: the business is worth about $16.6 billion ($411 per share) and owes about $2.2 billion. Cash flow before lenders returns to about $960 million, the 2024 level, which the business has already produced, then grows 3% a year for ten years to about $1.25 billion, holds for ten more years and fades 3% a year for twenty. The only driver is pricing keeping pace with cost inflation, as it did in 2022; no new products, acquisitions or share gains are credited. Our earlier figures were built on a different basis and are not comparable with these. The margin-of-safety price. We are reasonably confident of the earnings level: three straight years between $829 million and $959 million of cash flow before lenders, and a first half of 2026 with operating income up 2.7%. We are least sure of what persists after about 2036, since that is where roughly 40% of the base value sits, and that is the main way this valuation could be wrong. The worst plausible outcome is a construction slump at the same time as a large distributor shifts volume or terms. The structure should survive it: the debt is fixed-rate with only $600 million due before 2030, cash flow in our bear case still covers interest about five times, and the $600 million due in December 2027 can be repaid from cash. If we are wrong on the main points, a 10% lower earnings level would put the base near $188 per share, and no persistence beyond ten years would put it near $106; from $100 that outcome would then imply only about what a long bond pays. The price assumes a three-to-five-year holding period. The company paid about $181 million of dividends in 2025 (about $4.50 per share) and kept roughly $670 million of owner earnings after dividends, and it has also repurchased shares. The margin-of-safety price is $100 per share. From that price our bear case implies about 20% a year or more over three years counting dividends and retained cash, falling to the mid-teens if the bear case lasted five years, and the base case implies a far higher return. The price is not set lower because the earnings are well documented and the roofing replacement base is a structural feature of the business; it is not set higher because the bear case, with its debt, is a realistic outcome and the target is 20%.