A month has gone by since the last earnings report for Allegion (ALLE Quick QuoteALLE - Free Report) . Shares have added about 1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Allegion due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Allegion Q4 Earnings Top Estimates, ’22 View Solid

Allegion reported better-than-expected results for fourth-quarter 2021. The company’s earnings surpassed the Zacks Consensus Estimate by 11%.

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%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -6.31% due to these changes.

VGM Scores

At this time, Allegion has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Allegion has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.