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Allegion (ALLE) Surpasses Q4 Earnings and Sales Estimates

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Allegion plc (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.

Allegion PLC Price, Consensus and EPS Surprise

Allegion PLC Price, Consensus and EPS Surprise

Allegion PLC price-consensus-eps-surprise-chart | Allegion PLC Quote

Zacks Rank & Other Stocks to Consider

With a market capitalization of $10.9 billion, Allegion currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the industry are Alarm.com Holdings, Inc. (ALRM - Free Report) , Axon Enterprise, Inc. (AXON - Free Report) and NAPCO Security Technologies, Inc. (NSSC - Free Report) . All these stocks presently carry a Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, bottom-line estimates for these companies have improved for the current year. Further, positive earnings surprise in the last reported quarter was 58.06% for Alarm.com Holdings, 100.00% for Axon Enterprise and 30.77% for NAPCO Security.

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