We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Reasons Why You Should Avoid Investing in Allegion (ALLE) Now
Read MoreHide Full Article
Allegion plc’s (ALLE - Free Report) recent operational performance failed to impress investors due to tough end-market conditions and other challenges, which are likely to hurt its earnings in the near term.
Image Source: Zacks Investment Research
The Zacks Rank #4 (Sell) player has a market capitalization of $9.7 billion. In the past six months, the stock has lost 15.7% compared with the industry’s decline of 23.2%.
Let’s discuss the factors that might continue taking a toll on the firm.
Weak End-Market Conditions: Weakness in Allegion’s residential business adversely impacted its sales in first-quarter 2022. It is worth noting that sales from its residential business in the quarter were down in mid-single-digit percent year over year, owing to supply chain challenges and shortages in electronic components. In the quarters ahead, these challenges, along with logistics problems and labor issues, will likely affect ALLE’s revenues.
High Costs and Expenses: The company has been witnessing high cost of sales and operating expenses over time. In first-quarter 2022, the company’s cost of sales expanded 9.6% year over year to $434.9 million and selling & administrative expenses rose 3.4% to $171.7 million. In the quarter, the gross margin declined 290 basis points (bps) and the operating margin contracted 270 bps on a year-over-year basis. The results suffered from labor, raw material and freight-related cost inflation.
Escalated Debt Burden: ALLE’s profitability can be hurt by a highly leveraged balance sheet. Allegion’s long-term debt remained high at $1,426.8 million while exiting the first quarter of 2022. ALLE’s cash and cash equivalents of $305.1 million seem unimpressive considering its heavy debt load. For 2022, it predicts interest and other expenses to lower earnings by 15 cents. In June 2022, ALLE priced a public offering of senior notes worth $600 million in aggregate principal amount. Although the notes offering will help finance the Stanley Access Technologies buyout, it will add to Allegion’s existing debt balance.
Forex Woes: Given its widespread presence in international markets, the company is exposed to unfavorable foreign currency movements. In the first quarter, foreign exchange headwinds hurt its top-line performance by 1.9%. A stronger U.S. dollar might dampen its overseas business results in the quarters ahead.
High Tax Rate: High taxes are predicted to adversely impact the company’s earnings by 35 cents in 2022. For the year, the adjusted tax rate is expected to be 13%, higher than 7.5% recorded in 2021.
Southbound Estimate Trend: In the past 30 days, the Zacks Consensus Estimate for ALLE’s second-quarter 2022 earnings has declined from $5.67 to $5.63 on one downward estimate revision against none upward. Over the same time frame, the consensus estimate for 2022 earnings has decreased from $6.42 to $6.33 on one downward estimate revision against none upward.
Stocks to Consider
Some better-ranked companies from the Zacks industrial products sector are discussed below:
In the past 30 days, KNBE’s earnings estimates have decreased 6.7% for 2022. The stock has dipped 16.3% in the past six months.
Napco Security Technologies, Inc. (NSSC - Free Report) presently carries a Zacks Rank #2 (Buy). NSSC delivered a trailing four-quarter earnings surprise of 11.4%, on average.
NSSC’s earnings estimates have increased 16.2% for fiscal 2022 (ending June 2022) in the past 30 days. Its shares have decreased 20.7% in the past six months.
Roper Technologies, Inc. (ROP - Free Report) presently has a Zacks Rank #2. Its earnings surprise in the last four quarters was 2%, on average.
In the past 30 days, ROP’s earnings estimates have increased 0.1% for 2022. The stock has dipped 11.7% in the past six months.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Reasons Why You Should Avoid Investing in Allegion (ALLE) Now
Allegion plc’s (ALLE - Free Report) recent operational performance failed to impress investors due to tough end-market conditions and other challenges, which are likely to hurt its earnings in the near term.
Image Source: Zacks Investment Research
The Zacks Rank #4 (Sell) player has a market capitalization of $9.7 billion. In the past six months, the stock has lost 15.7% compared with the industry’s decline of 23.2%.
Let’s discuss the factors that might continue taking a toll on the firm.
Weak End-Market Conditions: Weakness in Allegion’s residential business adversely impacted its sales in first-quarter 2022. It is worth noting that sales from its residential business in the quarter were down in mid-single-digit percent year over year, owing to supply chain challenges and shortages in electronic components. In the quarters ahead, these challenges, along with logistics problems and labor issues, will likely affect ALLE’s revenues.
High Costs and Expenses: The company has been witnessing high cost of sales and operating expenses over time. In first-quarter 2022, the company’s cost of sales expanded 9.6% year over year to $434.9 million and selling & administrative expenses rose 3.4% to $171.7 million. In the quarter, the gross margin declined 290 basis points (bps) and the operating margin contracted 270 bps on a year-over-year basis. The results suffered from labor, raw material and freight-related cost inflation.
Escalated Debt Burden: ALLE’s profitability can be hurt by a highly leveraged balance sheet. Allegion’s long-term debt remained high at $1,426.8 million while exiting the first quarter of 2022. ALLE’s cash and cash equivalents of $305.1 million seem unimpressive considering its heavy debt load. For 2022, it predicts interest and other expenses to lower earnings by 15 cents. In June 2022, ALLE priced a public offering of senior notes worth $600 million in aggregate principal amount. Although the notes offering will help finance the Stanley Access Technologies buyout, it will add to Allegion’s existing debt balance.
Forex Woes: Given its widespread presence in international markets, the company is exposed to unfavorable foreign currency movements. In the first quarter, foreign exchange headwinds hurt its top-line performance by 1.9%. A stronger U.S. dollar might dampen its overseas business results in the quarters ahead.
High Tax Rate: High taxes are predicted to adversely impact the company’s earnings by 35 cents in 2022. For the year, the adjusted tax rate is expected to be 13%, higher than 7.5% recorded in 2021.
Southbound Estimate Trend: In the past 30 days, the Zacks Consensus Estimate for ALLE’s second-quarter 2022 earnings has declined from $5.67 to $5.63 on one downward estimate revision against none upward. Over the same time frame, the consensus estimate for 2022 earnings has decreased from $6.42 to $6.33 on one downward estimate revision against none upward.
Stocks to Consider
Some better-ranked companies from the Zacks industrial products sector are discussed below:
KnowBe4, Inc. presently has a Zacks Rank #1 (Strong Buy). Its earnings surprise in the last four quarters was 208.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 30 days, KNBE’s earnings estimates have decreased 6.7% for 2022. The stock has dipped 16.3% in the past six months.
Napco Security Technologies, Inc. (NSSC - Free Report) presently carries a Zacks Rank #2 (Buy). NSSC delivered a trailing four-quarter earnings surprise of 11.4%, on average.
NSSC’s earnings estimates have increased 16.2% for fiscal 2022 (ending June 2022) in the past 30 days. Its shares have decreased 20.7% in the past six months.
Roper Technologies, Inc. (ROP - Free Report) presently has a Zacks Rank #2. Its earnings surprise in the last four quarters was 2%, on average.
In the past 30 days, ROP’s earnings estimates have increased 0.1% for 2022. The stock has dipped 11.7% in the past six months.