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Allegion (ALLE) Up 2.8% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Allegion (ALLE). Shares have added about 2.8% 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 its most recent earnings report in order to get a better handle on the important drivers.

Allegion Q1 Earnings and Revenues Beat Estimates

Allegion reported impressive results for first-quarter 2019, wherein adjusted earnings and revenues beat the Zacks Consensus Estimate.

Earnings/Revenues

Quarterly adjusted earnings came in at 88 cents per share, outpacing the Zacks Consensus Estimate of 87 cents. The bottom line was also 10% higher than the year-ago figure. The upside can be primarily attributed to impressive sales growth and improved operating income.

Revenues for the reported quarter came in at $655 million, up 6.8% year over year. The top line also surpassed the consensus estimate of $651.6 million. Revenues improved 5.8% on an organic basis. The stellar performance was backed by strength in Americas non-residential business, and acquisition benefits, partially offset by adverse impacts of unfavorable foreign exchange movements.

Segmental Breakup

Revenues in the Americas rose 8.2% year over year to $475.3 million. EMEIA (Europe, Middle East, India and Africa) revenues declined 4.9% to $142.9 million. Revenues in the Asia-Pacific surged 55.3% to $36.8 million in the reported quarter.

Costs/Margins

In the first quarter, Allegion’s cost of sales escalated 6.4% year over year to $378.1 million. Gross profit grew 7.4% while gross margin improved 30 basis points (bps) to 42.3%.

Selling and administrative expenses jumped 6.2% year over year to $168.9 million.

Adjusted operating margin expanded 10 bps to 17.1%.

Balance Sheet/Cash Flow

As of Mar 31, 2019, Allegion had cash and cash equivalents of $153.8 million, down from $283.8 recorded as of Dec 31 2018.  Long-term debt was $1,401.3 million, down from $1,409.5 million recorded at the end of 2018.

In first-quarter 2019, the company used net cash of $12.6 million from its operating activities, compared with $10.1 million used in the year-ago quarter. Capital expenditures totaled $12.3 million compared with $8.7 million a year ago.

2019 Guidance

Adjusted earnings per share are now expected in the range of $4.75 to $4.90, reflecting an increase of 6% to 9% year over year.

The company expects full-year 2019 revenue growth on both reported and organic basis in the band of 5-6%.

Full-year adjusted effective tax rate is anticipated to be 16%.

Available cash flow is targeted to be approximately $430-$450 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Allegion has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. 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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