Allegion plc (ALLE Quick QuoteALLE - Free Report) has reported better-than-expected results for fourth-quarter 2021. The company’s earnings surpassed the Zacks Consensus Estimate by 11% and its sales beat the same by 4.91%.

Adjusted earnings in the quarter under review were $1.11 per share, surpassing the Zacks Consensus Estimate of $1.00. However, the bottom line declined 25.5% from the year-ago figure of $1.49, as supply-chain woes, and shortages of electronics and other parts adversely impacted sales. High costs and expenses added to the woes.

In 2021, the company’s adjusted earnings were $5.19 per share, increasing 1.6% year over year. Also, the bottom line surpassed the Zacks Consensus Estimate of $5.08.

Revenue Details

In the quarter under review, Allegion’s revenues were $709.2 million, reflecting a decline of 2.5% from the year-ago quarter. Organic sales in the quarter decreased 1.4%, while forex woes left an adverse impact of 0.8%. Acquisitions/divestitures lowered sales by 0.3%. The impacts of healthy demand in the quarter were more than offset by headwinds caused by supply-chain restrictions.

Allegion’s revenues surpassed the Zacks Consensus Estimate of $676 million.

The company reported revenues under two segments. A brief discussion of the quarterly results is provided below:

Revenues from Allegion Americas decreased 4.2% year over year to $499.5 million. It accounted for 70.4% of the quarter’s sales. Lower sales from the residential business were partially offset by gains in the non-residential business. Supply-chain constraints, and electronics and other parts’ shortages played spoilsports in the quarter.

Organic sales decreased 4.3% year over year and foreign currency translation had a positive impact of 0.1% on the same.

Revenues from Allegion International increased 1.7% year over year to $209.7 million in the quarter. It accounted for 29.6% of the quarter’s sales. The segment benefitted from strength in the Global Portable Security businesses.

Organic sales increased 5.8% year over year. Acquisitions/divestitures had a negative impact of 1.1% and foreign currency translation had a negative impact of 3% on sales.

In 2021, the company’s revenues totaled $2.87 billion, increasing 5.4% year over year. Also, its yearly sales surpassed the Zacks Consensus Estimate of $2.83 billion.

Margin Profile

In the reported quarter, Allegion’s cost of sales grew 3.8% year over year to $422.7 million. The cost of sales was 59.6% of the quarter’s net sales. The gross profit decreased 10.4% year over year to $286.5 million, while the gross margin contracted 360 basis points (bps) to 40.4%.

Selling and administrative expenses increased 6.1% year over year to $171.4 million. It represented 24.2% of net sales in the reported quarter versus 22.2% in the year-ago period. Adjusted earnings before interest, tax, depreciation and amortization were $136.3 million, reflecting a year-over-year decrease of 25.8%. Margin decreased 610 bps year over year to 19.2%.

The adjusted operating income in the quarter decreased 28.9% year over year to $116.3 million. The adjusted margin was 16.4%, down from 22.5% a year ago. The results suffered from cost inflation related to labor, material, packaging, freight, and operational inefficiencies. This was partially offset by the impacts of effective pricing.

Interest expenses were $13.2 million, up7.3% year over year. The effective tax rate in the quarter was 6.1%, down from 9.5% in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the fourth quarter, Allegion had cash and cash equivalents of $397.9 million, down 21% from $503.9 million at the end of the previous quarter. Long-term debt increased 19.9% to $1,429.5 million from $1,192.5 million in the previous quarter.

In 2021, the company generated net cash of $488.6 million from operating activities, decreasing 0.3% from the previous year. Capital expenditure was $45.4 million, decreasing 3.6% year over year. The free cash flow was $443.2 million for 2021.

In the year, the company repurchased 3.3 million shares for $412.8 million, increasing 97.7% year over year. Dividends paid out in the year totaled $129 million, reflecting an increase of 10% from the previous year.

Outlook

For 2022, Allegion anticipates benefiting from strengthening end-market demand and margin improvements. Effective pricing actions will be helpful throughout the year. On a sequential basis, the company expects improvements in revenues, margins and earnings.

The company predicts year-over-year revenue growth of 6-7.5%. Organic sales are expected to rise 7-8.5% from a year ago. Adjusted earnings are likely to be $5.55-$5.75 per share. Free cash flow for the year is anticipated to be$465-$485 million. The tax rate in the year is expected to be 13%.