Allegion plc ( ALLE Quick Quote ALLE - Free Report) reported impressive fourth-quarter 2020 results, with earnings surpassing estimates by 27.3%. This was the fourth consecutive quarter of better-than-expected bottom-line results. Also, sales surpassed estimates by 5.3%. The company’s adjusted earnings in the quarter were $1.49 per share, surpassing the Zacks Consensus Estimate of $1.17. On a year-over-year basis, the bottom line jumped 16.4%. In 2020, the company’s adjusted earnings were $5.11 per share, topping the consensus estimate of $4.80 and the year-ago figure of $4.89. Revenue Details
In the reported quarter, Allegion’s net revenues were $727.3 million, up 1.1% year over year. The results were adversely impacted by a 0.6% fall in organic sales and a 0.2% adverse impact from acquisitions and divestitures, partially offset by a 1.9% positive impact of foreign currency translation.
Also, the company’s top line surpassed the Zacks Consensus Estimate of $690.9 million. The company reported revenues under three segments. A brief discussion of the quarterly results is provided below: Revenues in the Americas fell 1% year over year to $521.2 million owing to softness in non-residential business, partially offset by gains in residential business. Organic sales fell 0.7% year over year while acquisitions and divestitures had an adverse impact of 0.3%. EMEA (Europe, Middle East and Africa) revenues grew 10.5% to $165.3 million on the back of healthy Global Portable Security, SimonsVoss and Interflex businesses. Organic sales in the quarter expanded 3.1% year over year and foreign currency translation had a positive impact of 7.4%. Revenues in the Asia Pacific fell 6.4% to $40.8 million in the quarter, reflecting weak end markets in Korea. Organic sales decreased 11.9% year over year while foreign currency translation had a positive impact of 5.5%. In 2020, the company’s net revenues were $2.72 billion, down 4.7% year over year. Also, the top line exceeded the Zacks Consensus Estimate of $2.68 billion. Margin Profile
In the reported quarter, Allegion’s cost of sales grew 1.8% year over year to $407.4 million. Cost of sales was 56% of the quarter’s net sales. Gross profit increased 0.2% year over year to $319.9 million, while gross margin fell 40 basis points (bps) to 44%.
Selling and administrative expenses decreased 5% year over year to $161.5 million. It represented 22.2% of net sales in the reported quarter versus 23.6% in the year-ago quarter. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $183.7 million, reflecting an increase of 7.7%. Margin grew 160 bps year over year to 25.3%. Adjusted operating income in the quarter increased 8.3% year over year to $163.5 million. Also, adjusted margin was 22.5%, up from 21%. Interest expense was $12.3 million, down 7.5%. Balance Sheet & Cash Flow
Exiting the fourth quarter, Allegion had cash and cash equivalents of $480.4 million, up 12% from $428.9 million recorded in the last reported quarter. Long-term debt was flat sequentially at $1,429.4 million.
It generated net cash of $490.3 million from operating activities in 2020, inching up 0.4% from the previous year. Capital expenditure totaled $47.1 million compared with $65.6 million invested in 2019. Free cash flow increased 4.9% to $443.2 million. During the year, the company rewarded shareholders with a dividend payout of $117.3 million. The amount represents growth of 16.6% year over year. Amount spent on buying back shares totaled $208.8 million, down 7.6%. Outlook
Effective Jan 1, 2021, the company’s operating segments are Allegion Americas and Allegion International — combining the results of the previous EMEA and Asia Pacific segments.
For 2021, the company predicts revenue to decline 0.5-1.5% year over year. Organic sales are expected to fall 1.5-2.5%. On a segmental basis, organic sales in residential business in Allegion Americas and Allegion International are likely to increase. However, organic sales in non-residential business of Allegion Americas might decline. Adjusted earnings are expected to be $4.70-$4.85 per share. Free cash flow in the year is expected to be $400-$420 million.