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ALLE Gains on Strength in Allegion Americas Segment Amid Cost Woes

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Key Takeaways

  • ALLE expects 2025 revenues to grow 1-3%, driven by demand in non-residential and electronic security markets.
  • Trimco and Next Door acquisitions enhance ALLE's doors and frames portfolio in the Americas segment.
  • High raw material costs and FX pressures threaten ALLE's profitability despite ongoing expansion efforts.

Allegion plc (ALLE - Free Report) is benefiting from stable demand across end markets like education, healthcare, government, hospitality and retail, and the acquisitions of Next Door Company and Trimco within the Allegion Americas segment. The increase in demand for non-residential products also bodes well. Higher demand for electronic security products, driven by growing awareness about the security and safety of people and infrastructure, is supporting the Allegion International segment’s performance. Positive price realization and the acquisition of Lemaar Pty also bode well for the segment. Driven by strength across the business, Allegion’s total revenues are anticipated to increase 1-3% year over year in 2025, while organic sales are expected to increase 1.5-3.5% year over year.

Allegion’s expansion initiatives are expected to drive growth. In June 2025, ALLE completed the acquisition of ELATEC, which is expected to boost its global electronics portfolio in non-residential end markets such as education, healthcare, hospitality, enterprise and industrial. Also in the same month, ALLE acquired Novas to augment its door hardware portfolio. In April 2025, ALLE acquired Trimco Hardware (Trimco), along with its brands and various assets, through one of its subsidiaries. The inclusion of Trimco’s expertise in specialty solutions, coupled with its strong innovation capabilities, enabled Allegion to boost its door and frame portfolio within the Americas segment.

Allegion acquired Lemaar Pty Ltd (Lemaar) in March 2025. This acquisition boosted ALLE’s security and accessibility portfolio in Australia. Also, in February 2025, the company acquired Next Door Company, which expanded its doors and frames portfolio. 

Allegion’s commitment to rewarding shareholders through dividends and share buybacks is encouraging. The company paid dividends worth $43.6 million in the first quarter of 2025, reflecting an increase of 3.6% year over year. In the same period, Allegion repurchased shares for $40 million. At the time of exiting the first quarter of 2025, the company was left to repurchase shares worth $200 million under its 2023-approved program. In February 2025, Allegion announced a 6% hike in its quarterly dividend rate, which is now 51 cents per share.

ALLE’s Price Performance

In the year-to-date period, this Zacks Rank #3 (Hold) company’s shares have gained 4.2% compared with the industry’s 1.5% growth.

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Headwinds Plaguing ALLE

ALLE has been experiencing rising costs and expenses for a while. During the first quarter of 2025, the company witnessed a 3.4% year-over-year increase in the cost of sales due to high raw material costs. Also, selling and administrative expenses inched up 3.1% year over year. This can be attributed to higher investments in new products and channel development, and growth initiatives. High costs pose a threat to Allegion’s bottom line. Escalating costs and expenses, if left unchecked, may negatively impact profitability in the quarters ahead.

Allegion intends to expand its business in new overseas markets. Its international presence exposes it to the risk of adverse currency fluctuations. This is because a strengthening U.S. dollar may require the company to either raise prices or see its margins shrink in locations outside the United States. In the first quarter, forex woes left an adverse impact of 0.8%.

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