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Allegion plc (ALLE - Free Report) reported impressive third-quarter 2021 results, with earnings surpassing estimates by 15.6%. This marks the seventh consecutive quarter of better-than-expected bottom-line results. Sales surpassed estimates by 1.7%.
The company’s adjusted earnings in the quarter were $1.56 per share, surpassing the Zacks Consensus Estimate of $1.35. On a year-over-year basis, the bottom line declined 6.6%.
Revenue Details
In the reported quarter, Allegion’s net revenues were $717 million, down 1.6% year over year. Organic sales declined 1.6% while the positive impact of foreign currency translation and acquisitions offset the adverse impact of divestitures.
The company’s top line surpassed the Zacks Consensus Estimate of $705 million.
The company reported revenues under two segments. A brief discussion of the quarterly results is provided below:
Revenues from Allegion Americas decreased 2.7% year over year to $524.4 million. Lower sales across its non-residential and residential businesses were attributable to supply chain constraints and electronics and other parts shortages.
Organic sales decreased 3% year over year and foreign currency translation had a positive impact of 0.3% on the same.
Revenues from Allegion International increased 1.7% year over year to $192.6 million in the quarter, reflecting strength across its SimonsVoss, Interflex and Global Portable Security businesses.
Organic sales increased 2.5% year over year. Divestitures had a negative impact of 2.4% and foreign currency translation had a positive impact of 1.6% on sales.
In the reported quarter, Allegion’s cost of sales grew 1.8% year over year to $416.5 million. Cost of sales was 58.1% of the quarter’s net sales. Gross profit decreased 5.9% year over year to $300.5 million while gross margin contracted 190 basis points (bps) to 41.9%.
Selling and administrative expenses increased 3.8% year over year to $162.1 million. It represented 22.6% of net sales in the reported quarter versus 21.4% in the year-ago period. Adjusted earnings before interest, tax, depreciation and amortization were $162.3 million, reflecting a decrease of 14.2%. Margin decreased 340 bps year over year to 22.6%.
Adjusted operating income in the quarter decreased 15.5% year over year to $143.2 million. Adjusted margin was 20%, down from 23.3% a year ago. Interest expense was $12.3 million, down 4.7%.
Balance Sheet & Cash Flow
Exiting the third quarter, Allegion had cash and cash equivalents of $503.9 million, up 9.5% from $460.2 million recorded in the last reported quarter. Long-term debt was $1,192.5 million, down from $1,430.3 million sequentially.
It generated net cash of $356.4 million from operating activities in the first nine months of 2021 compared with $289.4 million in the prior-year period. Capital expenditure totaled $28.7 million against $33.3 million invested in the year-ago period. Free cash flow increased 28% to $327.7 million.
In the first nine months of 2021, the company rewarded shareholders with a dividend payout of $96.9 million. The amount represents growth of 9.7% year over year. Amount spent on buying back shares totaled $212.7 million, up 126%.
Guidance
Allegion reaffirmed its earnings and revenue guidance for 2021. For the year, the company predicts revenues to grow 4-4.5% year over year. Organic sales are expected to rise 3-3.5% from a year ago. On a segmental basis, organic sales in Allegion Americas segment are expected to grow 0.5-1% year over year while the same for Allegion International are likely to increase 9-10%.
Adjusted earnings are expected in the range of $5.00-$5.10 per share. Free cash flow for the year is expected within $460-$480 million.
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
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Allegion (ALLE) Q3 Earnings & Revenues Surpass Estimates
Allegion plc (ALLE - Free Report) reported impressive third-quarter 2021 results, with earnings surpassing estimates by 15.6%. This marks the seventh consecutive quarter of better-than-expected bottom-line results. Sales surpassed estimates by 1.7%.
The company’s adjusted earnings in the quarter were $1.56 per share, surpassing the Zacks Consensus Estimate of $1.35. On a year-over-year basis, the bottom line declined 6.6%.
Revenue Details
In the reported quarter, Allegion’s net revenues were $717 million, down 1.6% year over year. Organic sales declined 1.6% while the positive impact of foreign currency translation and acquisitions offset the adverse impact of divestitures.
The company’s top line surpassed the Zacks Consensus Estimate of $705 million.
The company reported revenues under two segments. A brief discussion of the quarterly results is provided below:
Revenues from Allegion Americas decreased 2.7% year over year to $524.4 million. Lower sales across its non-residential and residential businesses were attributable to supply chain constraints and electronics and other parts shortages.
Organic sales decreased 3% year over year and foreign currency translation had a positive impact of 0.3% on the same.
Revenues from Allegion International increased 1.7% year over year to $192.6 million in the quarter, reflecting strength across its SimonsVoss, Interflex and Global Portable Security businesses.
Organic sales increased 2.5% year over year. Divestitures had a negative impact of 2.4% and foreign currency translation had a positive impact of 1.6% on sales.
Allegion plc Price, Consensus and EPS Surprise
Allegion plc price-consensus-eps-surprise-chart | Allegion plc Quote
Margin Profile
In the reported quarter, Allegion’s cost of sales grew 1.8% year over year to $416.5 million. Cost of sales was 58.1% of the quarter’s net sales. Gross profit decreased 5.9% year over year to $300.5 million while gross margin contracted 190 basis points (bps) to 41.9%.
Selling and administrative expenses increased 3.8% year over year to $162.1 million. It represented 22.6% of net sales in the reported quarter versus 21.4% in the year-ago period. Adjusted earnings before interest, tax, depreciation and amortization were $162.3 million, reflecting a decrease of 14.2%. Margin decreased 340 bps year over year to 22.6%.
Adjusted operating income in the quarter decreased 15.5% year over year to $143.2 million. Adjusted margin was 20%, down from 23.3% a year ago. Interest expense was $12.3 million, down 4.7%.
Balance Sheet & Cash Flow
Exiting the third quarter, Allegion had cash and cash equivalents of $503.9 million, up 9.5% from $460.2 million recorded in the last reported quarter. Long-term debt was $1,192.5 million, down from $1,430.3 million sequentially.
It generated net cash of $356.4 million from operating activities in the first nine months of 2021 compared with $289.4 million in the prior-year period. Capital expenditure totaled $28.7 million against $33.3 million invested in the year-ago period. Free cash flow increased 28% to $327.7 million.
In the first nine months of 2021, the company rewarded shareholders with a dividend payout of $96.9 million. The amount represents growth of 9.7% year over year. Amount spent on buying back shares totaled $212.7 million, up 126%.
Guidance
Allegion reaffirmed its earnings and revenue guidance for 2021. For the year, the company predicts revenues to grow 4-4.5% year over year. Organic sales are expected to rise 3-3.5% from a year ago. On a segmental basis, organic sales in Allegion Americas segment are expected to grow 0.5-1% year over year while the same for Allegion International are likely to increase 9-10%.
Adjusted earnings are expected in the range of $5.00-$5.10 per share. Free cash flow for the year is expected within $460-$480 million.
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the same space are Brady Corporation (BRC - Free Report) , Johnson Controls International plc (JCI - Free Report) , and Ituran Location and Control Ltd. (ITRN - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Brady delivered an earnings surprise of 2.49%, on average, in the trailing four quarters.
Johnson Controls delivered an earnings surprise of 4.43%, on average, in the trailing four quarters.
Ituran Location delivered an earnings surprise of 22.89%, on average, in the trailing four quarters.