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Allegion (ALLE) to Report Q2 Earnings: What's in the Cards?

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Allegion plc (ALLE - Free Report) is scheduled to report second-quarter 2018 results on Jul 26, before the market opens.

The company pulled off an average positive earnings surprise of 6.08% over the last four quarters. The Zacks Consensus Estimate for the to-be-reported quarter earnings is pegged at $1.20. The stock currently carries a Zacks Rank #3 (Hold).

Let us see how things are shaping up for the company prior to this announcement.

Factors to Influence Q2 Results

Allegion intends to improve its top-line performance on the back of the company’s ongoing innovation investments and solid demand across all end-markets. Additionally, the company’s recently-made acquisitions are expected to bolster revenues in the quarters ahead.

Rise in electromechanical products’ demand, and strength in residential and non-residential products businesses will likely continue to improve near-term revenues of the company’s Americas segment. Moreover, the acquisitions of Technical Glass Products (January 2018) and Aurora Systems, Inc. (March 2018) will likely contribute to the upside.

Revenues of Allegion’s EMEIA (Europe, Middle East, India and Africa) segment are expected to be stronger in the quarters ahead, driven by robust demand across all product lines, especially across portable security, Interflex and SimonsVoss businesses. Also, the QMI business buyout (February 2018) is anticipated to be conducive to the segmental top-line performance, going forward.   

Moving ahead, top-line results of the company’s Asia-Pacific segment will likely improve on the back of appropriate project timings and favorable foreign currency-translation impact.  

The Zacks Consensus Estimate for second-quarter revenues of Allegion’s Americas, EMEIA and Asia-Pacific segments are currently pegged at $518 million, $147 million and $31.8 million respectively, higher than the corresponding tallies of $469 million, $129 million and $29.2 million recorded in the year-ago quarter.

Allegion intends to drive its near-term bottom-line growth on the back of strategic pricing actions, stronger productivity and diligent cost-saving measures. However, inflationary headwinds across the entire supply-chain process remain a major drag.

Workforce scarcity has been adversely impacting the timing of project completion across many businesses of Allegion. Also, a labor strike in a certain manufacturing facility of Turkey has proved challenging for the company. Additionally, Allegion stated that material cost inflation will continue to dampen its profitability in the upcoming quarters of 2018. Furthermore, acquisition-integration expenses are expected to drag down margins in the near future.

Nevertheless, the Zacks Consensus Estimates for second-quarter adjusted operating income of Allegion’s Americas, EMEIA and Asia-Pacific segments are currently pegged at $159 million, $12.9 million and $2.7 million respectively, higher than the corresponding tallies of $140 million, $8.5 million and $2.3 million recorded in the year-ago quarter.

Stocks to Consider

Our proven model provides some idea on the stocks that are about to release their earnings results. Per the model, a stock needs to have a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or 2 (Buy) or at least 3, for a likely earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

However, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Here are some companies in the Zacks Industrial sector that you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

Atkore International Group Inc. (ATKR - Free Report) , with an Earnings ESP of +1.49% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Graco Inc. (GGG - Free Report) , with an Earnings ESP of +4.00% and a Zacks Rank #1.

Eaton Corporation plc (ETN - Free Report) , with an Earnings ESP of +0.67% and a Zacks Rank of 2.

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