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Allegion (ALLE) to Report Q3 Earnings: Is a Beat in Store?

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Allegion plc (ALLE - Free Report) is slated to report third-quarter 2020 results on Oct 22, before market open.

The company delivered better-than-expected results thrice in the last four quarters, while meeting estimates once. Earnings surprise for the last four quarters was a positive 10.32%, on average. Notably, its second-quarter 2020 adjusted earnings of 92 cents per share surpassed the Zacks Consensus Estimate of 79 cents by 16.46%.

In the past three months, shares of Allegion have lost 5.4% compared with the industry’s growth of 10.4%.

Factors at Play

Allegion is expected to have benefited from its incremental investments for product development and channel initiatives in the third quarter. Also, the company’s pricing, productivity and supply chain initiatives, along with its actions to optimize and simplify business operations, are expected to have boosted its performance. In addition, some of its actions, including the reduction of discretionary expenses, a hiring freeze, as well as restructuring and re-prioritization of capital expenditure, are anticipated to have helped it maintain a healthy margin performance.

Coming to operating segments, strength across the company’s residential business backed by healthy backlog and solid institutional end markets, is likely to have supplemented the Americas segment’s sales. Also, improvement in demand across home builder markets and higher point-of-sale in the e-commerce channels are likely to have supported its performance. In addition, strength in the electronics business is likely to have augmented the segment’s sales in the third quarter. However, the coronavirus-led overall low demand environment and challenging conditions in the commercial end-market are expected to have had a bearing on its top-line performance. Amid this backdrop, the Zacks Consensus Estimate for third-quarter 2020 revenues of the Americas segment is currently pegged at $500 million, suggesting an increase of 12.6% from the previous quarter’s reported number.

In addition, steady demand for its electronic security products, benefits from restructuring programs and initiatives to address the cost structure are expected to have acted as tailwinds for its Europe, Middle East, India and Africa (EMEIA), and Asia Pacific segments. However, the coronavirus outbreak-induced market downturn is expected to have adversely impacted both segments’ top-line performance. Also, persistent weakness in the residential markets in China and Australia might have adversely impacted the Asia Pacific segment’s top-line performance. Notably, the consensus estimate for third-quarter revenues from the EMEIA segment currently stands at $127 million, indicating a 14.4% sequential increase, whereas that for the Asia Pacific segment is currently pegged at $37.3 million, indicating growth of 9.1% from the previous-quarter reported figure.

Earnings Whispers

Our proven model suggests an earnings beat for Allegion this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The company has an Earnings ESP of +2.51% as the Most Accurate Estimate is pegged at $1.23, higher than the Zacks Consensus Estimate of $1.20.

Allegion PLC Price and EPS Surprise

Allegion PLC Price and EPS Surprise

Allegion PLC price-eps-surprise | Allegion PLC Quote

Zacks Rank: Allegion carries a Zacks Rank #2.

Other Key Picks

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this season:

AGCO Corporation (AGCO - Free Report) has an Earnings ESP of +6.07% and it sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fortune Brands Home Security, Inc. has an Earnings ESP of +2.27% and it carries a Zacks Rank #2.

Johnson Controls International plc (JCI - Free Report) has an Earnings ESP of +4.93% and a Zacks Rank of 3 at present.

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