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Why Is Allegion (ALLE) Up 5.7% Since Last Earnings Report?
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It has been about a month since the last earnings report for Allegion (ALLE - Free Report) . Shares have added about 5.7% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Allegion Beats on Q3 Earnings, Raises 2023 EPS View
Allegion’s third-quarter 2023 adjusted earnings of $1.94 per share beat the Zacks Consensus Estimate of adjusted earnings of $1.71 cents per share. The bottom line improved 12.1% year over year.
Revenue Details
In the quarter under review, Allegion’s revenues were $917.9 million, increasing 0.5% from the year-ago quarter. However, organic sales in the quarter decreased 0.6% due to lower volumes in the mechanical portfolio. Allegion’s revenues missed the Zacks Consensus Estimate of $919 million.
Acquired assets boosted sales by 0.1%. Forex woes left a positive impact of 1% on revenues.
ALLE reported revenues under two segments. A brief discussion of the quarterly results is provided below:
Revenues from Allegion Americas decreased 0.1% year over year to $740.9 million. The figure accounted for 80.7% of the quarter’s sales. Our estimate for segmental revenues was $744.8 million.
Forex woes left a positive impact of 0.1% on revenues. Operating income was $200.2 million for the quarter, up 12.2% year over year. Our estimate for the quarter was $188.8 million.
Revenues from Allegion International were $177.0 million in the quarter, up 3% year over year. The metric accounted for 19.3% of the quarter’s sales. Our estimate for segmental revenues was $174.6 million.
Organic sales decreased 2.8% year over year while foreign currency translation had a negative impact of 5.2% on sales. Operating income was $15.7 million for the quarter, up 6.1% year over year. Our estimate for the quarter was $14.8 million.
Margin Profile
In the reported quarter, Allegion’s cost of sales decreased 5.7% year over year to $514.6 million. The gross profit increased 9.6% year over year to $403.3 million while the gross margin jumped 360 basis points (bps) to 43.9%.
Selling and administrative expenses increased 2.5% year over year to $210.2 million. Adjusted EBITDA was $219.1 million, reflecting a year-over-year increase of 5%. The margin grew 150 bps year over year to 29.6%.
The adjusted operating income in the quarter increased 11.7% year over year to $215.9 million. The adjusted margin was 23.5%, up 230 bps. The results were attributable to the positive price and productivity net of inflation and investments.
Interest expenses were $22.9 million, down 0.9% year over year due to lower outstanding indebtedness. The effective tax rate in the quarter was 8.1%, down from 14.3% in the year-ago quarter.
Balance Sheet and Cash Flow
While exiting the third quarter of 2023, Allegion had cash and cash equivalents of $364.3 million compared with $288.0 million at the end of fourth-quarter 2022. Long-term debt was $2,005.1 million compared with $2,081.9 million reported at the end of fourth-quarter 2022.
In the first nine months of 2023, ALLE generated net cash of $381.1 million from operating activities, increasing 42.7% from the previous year’s level. Capital expenditure was $60.7 million, increasing 46.3% year over year. The free cash flow was $320.4 million for the first nine months of 2023.
In the same period, Allegion repurchased shares for $19.9 million, down 67.4% year over year. Dividends paid out totaled $119.2 million, reflecting an increase of 10.3% from the previous year’s level.
Outlook
ALLE has affirmed its sales guidance for 2023. Allegion now expects revenues of 11.5-12.5%. The company anticipates organic sales of 5.5-6.5%.
However, the company has increased its 2023 earnings guidance. Earnings are predicted to be $6.10-$6.20 per share. Adjusted earnings are likely to be $6.80-$6.90 per share compared with $6.70-$6.80 per share stated before. The Zacks Consensus Estimate for the same is $6.75 per share.
The company expects a free cash flow of $500-$520 million. The tax rate in the year is expected to be 15%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -8.14% due to these changes.
VGM Scores
Currently, Allegion has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, 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.
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Why Is Allegion (ALLE) Up 5.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Allegion (ALLE - Free Report) . Shares have added about 5.7% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Allegion Beats on Q3 Earnings, Raises 2023 EPS View
Allegion’s third-quarter 2023 adjusted earnings of $1.94 per share beat the Zacks Consensus Estimate of adjusted earnings of $1.71 cents per share. The bottom line improved 12.1% year over year.
Revenue Details
In the quarter under review, Allegion’s revenues were $917.9 million, increasing 0.5% from the year-ago quarter. However, organic sales in the quarter decreased 0.6% due to lower volumes in the mechanical portfolio. Allegion’s revenues missed the Zacks Consensus Estimate of $919 million.
Acquired assets boosted sales by 0.1%. Forex woes left a positive impact of 1% on revenues.
ALLE reported revenues under two segments. A brief discussion of the quarterly results is provided below:
Revenues from Allegion Americas decreased 0.1% year over year to $740.9 million. The figure accounted for 80.7% of the quarter’s sales. Our estimate for segmental revenues was $744.8 million.
Forex woes left a positive impact of 0.1% on revenues. Operating income was $200.2 million for the quarter, up 12.2% year over year. Our estimate for the quarter was $188.8 million.
Revenues from Allegion International were $177.0 million in the quarter, up 3% year over year. The metric accounted for 19.3% of the quarter’s sales. Our estimate for segmental revenues was $174.6 million.
Organic sales decreased 2.8% year over year while foreign currency translation had a negative impact of 5.2% on sales. Operating income was $15.7 million for the quarter, up 6.1% year over year. Our estimate for the quarter was $14.8 million.
Margin Profile
In the reported quarter, Allegion’s cost of sales decreased 5.7% year over year to $514.6 million. The gross profit increased 9.6% year over year to $403.3 million while the gross margin jumped 360 basis points (bps) to 43.9%.
Selling and administrative expenses increased 2.5% year over year to $210.2 million. Adjusted EBITDA was $219.1 million, reflecting a year-over-year increase of 5%. The margin grew 150 bps year over year to 29.6%.
The adjusted operating income in the quarter increased 11.7% year over year to $215.9 million. The adjusted margin was 23.5%, up 230 bps. The results were attributable to the positive price and productivity net of inflation and investments.
Interest expenses were $22.9 million, down 0.9% year over year due to lower outstanding indebtedness. The effective tax rate in the quarter was 8.1%, down from 14.3% in the year-ago quarter.
Balance Sheet and Cash Flow
While exiting the third quarter of 2023, Allegion had cash and cash equivalents of $364.3 million compared with $288.0 million at the end of fourth-quarter 2022. Long-term debt was $2,005.1 million compared with $2,081.9 million reported at the end of fourth-quarter 2022.
In the first nine months of 2023, ALLE generated net cash of $381.1 million from operating activities, increasing 42.7% from the previous year’s level. Capital expenditure was $60.7 million, increasing 46.3% year over year. The free cash flow was $320.4 million for the first nine months of 2023.
In the same period, Allegion repurchased shares for $19.9 million, down 67.4% year over year. Dividends paid out totaled $119.2 million, reflecting an increase of 10.3% from the previous year’s level.
Outlook
ALLE has affirmed its sales guidance for 2023. Allegion now expects revenues of 11.5-12.5%. The company anticipates organic sales of 5.5-6.5%.
However, the company has increased its 2023 earnings guidance. Earnings are predicted to be $6.10-$6.20 per share. Adjusted earnings are likely to be $6.80-$6.90 per share compared with $6.70-$6.80 per share stated before. The Zacks Consensus Estimate for the same is $6.75 per share.
The company expects a free cash flow of $500-$520 million. The tax rate in the year is expected to be 15%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -8.14% due to these changes.
VGM Scores
Currently, Allegion has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, 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.