CSL Q2 Deep Dive: Reroofing Strength Offsets New Build Weakness, Margins Face Pressure

August 12, 2025 at 23:37 PM EDT

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Building envelope solutions provider Carlisle Companies (NYSE: CSL) fell short of the market’s revenue expectations in Q2 CY2025, with sales flat year on year at $1.45 billion. Its non-GAAP profit of $6.27 per share was 5.4% below analysts’ consensus estimates.

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Carlisle (CSL) Q2 CY2025 Highlights:

Revenue: $1.45 billion vs analyst estimates of $1.50 billion (flat year on year, 3.2% miss)
Adjusted EPS: $6.27 vs analyst expectations of $6.63 (5.4% miss)
Adjusted EBITDA: $389.3 million vs analyst estimates of $421.2 million (26.9% margin, 7.6% miss)
Operating Margin: 23.1%, down from 26% in the same quarter last year
Organic Revenue fell 2.9% year on year vs analyst estimates of flat growth (333.6 basis point miss)
Market Capitalization: $16.39 billion

StockStory’s Take

Carlisle Companies’ second quarter results were met with a significant negative market reaction, as revenue and non-GAAP profit both fell below Wall Street expectations. Management attributed the shortfall to continued weakness in new construction demand and softer volumes in both commercial and residential segments, with CEO Chris Koch noting, “building product markets and new construction failed to gain the momentum we had anticipated.” Despite the muted environment, the company highlighted the resilience of its commercial reroofing business and the benefits of prior investments in automation and innovation.

Looking ahead, Carlisle’s management is focused on countering ongoing headwinds in new construction and residential repair by leaning into its backlog-driven reroofing business, new product introductions, and cost-saving measures. Management remains optimistic about long-term drivers, with CFO Kevin Zdimal stating, “our strong balance sheet provides the flexibility for continued strategic investments.” Key initiatives include integrating recent acquisitions and accelerating automation and innovation across segments, though management acknowledged that many benefits will materialize gradually over the next few years.

Key Insights from Management’s Remarks

Management identified the resilience of the company’s reroofing business and targeted cost actions in response to a challenging new construction environment as key themes impacting Q2 performance and future outlook.

Commercial reroofing stability: The commercial reroofing segment maintained robust performance, driven by aging building stock and energy efficiency mandates. Management emphasized that recurring reroofing work now comprises about 70% of the core commercial roofing business, providing a more predictable revenue base.
New construction headwinds: Weakness in both residential and commercial new construction weighed on volumes, with management citing continued high interest rates, cautious builder sentiment, and delayed project decisions as the main obstacles. CEO Chris Koch pointed out that “the activity has changed and that a reduction in bids to a certain degree, especially on the new side” was evident.
Cost-saving and automation measures: Carlisle highlighted ongoing footprint rationalization and automation projects, especially in the CWT segment. These efforts are expected to deliver $12 million in annualized savings in the near term, with further synergies from acquisitions anticipated to total around $30 million for CWT over the next several quarters.
Innovation pipeline and product launches: Recent product introductions such as the Dual Tank Flexible FAST Adhesive and the expanding Blueskin portfolio are aimed at improving contractor efficiency and energy performance. The acquisition of Bonded Logic added recycled denim insulation technology, which management expects to drive double-digit revenue growth within a $14 billion insulation market.
Competitive and M&A landscape: The company reported limited disruption from competitors and described the M&A pipeline as active, though deal-making is hampered by valuation gaps between buyers and sellers. Management remains committed to disciplined capital allocation, balancing acquisitions, innovation, and shareholder returns.

Drivers of Future Performance

Carlisle’s forward outlook is shaped by persistent softness in new construction and residential activity, balanced by stable reroofing demand and a focus on operational efficiency.

Reroofing and backlog support: Management expects the commercial reroofing segment to continue providing resilience, supported by a multiyear backlog and ongoing demand for building upgrades driven by energy mandates. This area is the company’s most stable revenue stream amid broader market uncertainty.
Margin improvement initiatives: Carlisle is implementing self-help actions such as automation, facility rationalization, and integration of recent acquisitions. These are projected to drive meaningful margin expansion, particularly in the CWT segment by 2026, though management noted that some savings will phase in gradually.
Risks and external pressures: Persistent high interest rates, tariffs, and builder indecision remain key risks. Management acknowledged that the timing of demand recovery is uncertain, and that success will depend on effectively executing cost initiatives and capturing benefits from new product rollouts.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be watching (1) the pace at which automation and cost reduction initiatives translate into sustained margin improvement, (2) progress in integrating Bonded Logic and realizing its growth potential in insulation, and (3) whether the commercial reroofing backlog holds up amid continued softness in new construction. Tracking execution on new product launches and the stability of pricing in core segments will also be important markers.

Carlisle currently trades at $385.22, down from $408.96 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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