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Allegion (ALLE) Q1 Earnings Beat, Surge Y/Y on Higher Sales
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Allegion plc (ALLE - Free Report) reported better-than-expected results for first-quarter 2023. ALLE’s earnings surpassed the Zacks Consensus Estimate by 17% and sales beat the same by 8.5%.
Adjusted earnings in the quarter under review were $1.58 per share, surpassing the Zacks Consensus Estimate of $1.35 per share. Our estimate for first-quarter adjusted earnings was $1.34 per share. The bottom line increased 39.8% from the year-ago period’s $1.13.
Revenue Details
In the quarter under review, Allegion’s revenues were $923 million, reflecting growth of 27.6% from the year-ago quarter. Organic sales in the quarter increased 15%, driven by robust price realization and strong volume in the Americas non-residential business.
However, the results were partially affected by weakness in the Americas residential mechanical and certain international businesses. Acquired assets boosted sales by 14.1%. Forex woes left an impact of 1.5% on revenues. Allegion’s revenues surpassed the Zacks Consensus Estimate of $851 million. Our estimate for net sales in the reported quarter was $851.4 million.
ALLE reported revenues under two segments. A brief discussion of the quarterly results is provided below:
Revenues from Allegion Americas increased 42% year over year to $740.9 million. It accounted for 80.3% of the quarter’s sales. Our estimate for segmental revenues was $675.9 million. Organic sales increased 22.6% year over year, driven by strength in price realization and volume growth in residential and non-residential businesses.
The acquisition contributed 19.8% to total sales growth. However, forex woes left an impact of 0.4% on revenues.
Revenues from Allegion International were $182.1 million in the quarter, decreasing 9.7% year over year. The metric accounted for 19.7% of the quarter’s sales. Our estimate for segmental revenues was $175.4 million.
Organic sales decreased 4.8% year over year, while foreign currency translation had a negative impact of 4.4% on sales.
In the reported quarter, Allegion’s cost of sales grew 22.3% year over year to $532 million. The cost of sales was 57.6% of the quarter’s net sales. The gross profit increased 35.4% year over year to $391 million, while the gross margin jumped 250 basis points (bps) to 42.4%.
Selling and administrative expenses increased 28.1% year over year to $220 million. The metric represented 23.8% of net sales in the reported quarter compared with 23.7% in the year-ago period. Adjusted earnings before interest, tax, depreciation and amortization were $139.6 million, reflecting a year-over-year increase of 38.9%. The margin grew 120 bps year over year to 15.1%.
The adjusted operating income in the quarter increased 48.7% year over year to $192.4 million. The adjusted margin was 20.8%, up from 17.9% a year ago. The results were attributable to the positive price and productivity net of inflation and investments, positive business mix, and volume leverage associated with non-residential growth in the Americas segment.
Interest expenses were $23.6 million, up 98.3% year over year due to increased debt as a result of the Access Technologies acquisition. The effective tax rate in the quarter was 16.3%, up from 13.2% in the year-ago quarter.
Balance Sheet and Cash Flow
While exiting the first quarter of 2023, Allegion had cash and cash equivalents of $292.8 million, down 1.7% from $288.0 million at the end of fourth-quarter 2022. Long-term debt increased 45.6% to $2,109.3 million from $2,081.9 million at the end of fourth-quarter 2022.
In the first three months of 2023, ALLE generated net cash of $69 million from operating activities, increasing 236.6% from the previous year’s level. Capital expenditure was $22.3 million, increasing 156.3% year over year. The free cash flow was $46.7 million for the first three months of 2023.
In the same period, Allegion did not repurchase any shares. Dividends paid out totaled $39.4 million, reflecting an increase of 10.1% from the previous year’s level.
Outlook
For 2023, Allegion expects revenues of 11.5-13.5% compared with 9-10.5% mentioned earlier. However, the company anticipates organic sales of 5.5-7.5% compared with 2.5-4.5% stated earlier.
Earnings are predicted to be $5.95-$6.15 per share compared $5.70-$5.90 per share mentioned earlier. Adjusted earnings are likely to be $6.55-$6.75 per share compared with $6.30-$6.50 per share stated before.
The company expects a free cash flow of $480-$500 million compared with $470-$490 million mentioned earlier. The tax rate in the year is expected to be 15-15.5%.
Zacks Rank & Other Stocks to Consider
ALLE currently carries a Zacks Rank #2 (Buy). Some other top-ranked companies from the Industrial Products sector are discussed below:
ALG’s earnings surprise in the last four quarters was 6.0%, on average. In the past 60 days, estimates for Alamo’s 2023 earnings have increased 7.5%. The stock has gained 16.1% in the past six months.
Ingersoll Rand Inc. (IR - Free Report) presently sports a Zacks Rank of 1. IR’s earnings surprise in the last four quarters was 8.5%, on average.
In the past 60 days, estimates for Ingersoll Rand’s 2023 earnings have increased 3.3%. The stock has rallied 12% in the past six months.
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Allegion (ALLE) Q1 Earnings Beat, Surge Y/Y on Higher Sales
Allegion plc (ALLE - Free Report) reported better-than-expected results for first-quarter 2023. ALLE’s earnings surpassed the Zacks Consensus Estimate by 17% and sales beat the same by 8.5%.
Adjusted earnings in the quarter under review were $1.58 per share, surpassing the Zacks Consensus Estimate of $1.35 per share. Our estimate for first-quarter adjusted earnings was $1.34 per share. The bottom line increased 39.8% from the year-ago period’s $1.13.
Revenue Details
In the quarter under review, Allegion’s revenues were $923 million, reflecting growth of 27.6% from the year-ago quarter. Organic sales in the quarter increased 15%, driven by robust price realization and strong volume in the Americas non-residential business.
However, the results were partially affected by weakness in the Americas residential mechanical and certain international businesses. Acquired assets boosted sales by 14.1%. Forex woes left an impact of 1.5% on revenues. Allegion’s revenues surpassed the Zacks Consensus Estimate of $851 million. Our estimate for net sales in the reported quarter was $851.4 million.
ALLE reported revenues under two segments. A brief discussion of the quarterly results is provided below:
Revenues from Allegion Americas increased 42% year over year to $740.9 million. It accounted for 80.3% of the quarter’s sales. Our estimate for segmental revenues was $675.9 million. Organic sales increased 22.6% year over year, driven by strength in price realization and volume growth in residential and non-residential businesses.
The acquisition contributed 19.8% to total sales growth. However, forex woes left an impact of 0.4% on revenues.
Revenues from Allegion International were $182.1 million in the quarter, decreasing 9.7% year over year. The metric accounted for 19.7% of the quarter’s sales. Our estimate for segmental revenues was $175.4 million.
Organic sales decreased 4.8% year over year, while foreign currency translation had a negative impact of 4.4% 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 22.3% year over year to $532 million. The cost of sales was 57.6% of the quarter’s net sales. The gross profit increased 35.4% year over year to $391 million, while the gross margin jumped 250 basis points (bps) to 42.4%.
Selling and administrative expenses increased 28.1% year over year to $220 million. The metric represented 23.8% of net sales in the reported quarter compared with 23.7% in the year-ago period. Adjusted earnings before interest, tax, depreciation and amortization were $139.6 million, reflecting a year-over-year increase of 38.9%. The margin grew 120 bps year over year to 15.1%.
The adjusted operating income in the quarter increased 48.7% year over year to $192.4 million. The adjusted margin was 20.8%, up from 17.9% a year ago. The results were attributable to the positive price and productivity net of inflation and investments, positive business mix, and volume leverage associated with non-residential growth in the Americas segment.
Interest expenses were $23.6 million, up 98.3% year over year due to increased debt as a result of the Access Technologies acquisition. The effective tax rate in the quarter was 16.3%, up from 13.2% in the year-ago quarter.
Balance Sheet and Cash Flow
While exiting the first quarter of 2023, Allegion had cash and cash equivalents of $292.8 million, down 1.7% from $288.0 million at the end of fourth-quarter 2022. Long-term debt increased 45.6% to $2,109.3 million from $2,081.9 million at the end of fourth-quarter 2022.
In the first three months of 2023, ALLE generated net cash of $69 million from operating activities, increasing 236.6% from the previous year’s level. Capital expenditure was $22.3 million, increasing 156.3% year over year. The free cash flow was $46.7 million for the first three months of 2023.
In the same period, Allegion did not repurchase any shares. Dividends paid out totaled $39.4 million, reflecting an increase of 10.1% from the previous year’s level.
Outlook
For 2023, Allegion expects revenues of 11.5-13.5% compared with 9-10.5% mentioned earlier. However, the company anticipates organic sales of 5.5-7.5% compared with 2.5-4.5% stated earlier.
Earnings are predicted to be $5.95-$6.15 per share compared $5.70-$5.90 per share mentioned earlier. Adjusted earnings are likely to be $6.55-$6.75 per share compared with $6.30-$6.50 per share stated before.
The company expects a free cash flow of $480-$500 million compared with $470-$490 million mentioned earlier. The tax rate in the year is expected to be 15-15.5%.
Zacks Rank & Other Stocks to Consider
ALLE currently carries a Zacks Rank #2 (Buy). Some other top-ranked companies from the Industrial Products sector are discussed below:
Alamo Group Inc. (ALG - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks.
ALG’s earnings surprise in the last four quarters was 6.0%, on average. In the past 60 days, estimates for Alamo’s 2023 earnings have increased 7.5%. The stock has gained 16.1% in the past six months.
Ingersoll Rand Inc. (IR - Free Report) presently sports a Zacks Rank of 1. IR’s earnings surprise in the last four quarters was 8.5%, on average.
In the past 60 days, estimates for Ingersoll Rand’s 2023 earnings have increased 3.3%. The stock has rallied 12% in the past six months.