Allegion (ALLE) Gains From Business Strength Amid Headwinds
Allegion plc ALLE has been benefiting from solid demand across its end markets and its focus on operational execution. The company’s effective pricing actions have been helping it offset the negative impact of inflationary pressure.
Solid momentum in electronics and software solutions end markets within the Allegion International segment is supporting its growth. The segment’s revenues increased 3% in the third quarter of 2023.
ALLE remains focused on acquiring businesses to gain access to new customers, regions and product lines. The company’s acquisition of Plano Group (in January 2023) expanded its Interflex portfolio and AWFM business with new capabilities in SaaS models and recurring revenue solutions. In July 2022, it acquired Stanley Black & Decker, Inc.’s SWK Access Technologies Business. With this acquisition, Allegion enhanced its access, egress and access control solutions offerings. In the first nine months of 2023, buyouts boosted sales by 8.3%.
The company has been committed to rewarding shareholders through dividend payouts and share repurchases. For instance, in the first three quarters of 2023, Allegion paid out dividends worth $119.2 million, reflecting an increase of 10.3% year over year. In 2022, it disbursed dividends worth $143.9 million and bought back 0.5 million shares for $61 million. In February 2023, ALLE hiked its dividend rate by 10%.
In the past three months, this Zacks Rank #3 (Hold) company has gained 15.1% compared with the industry’s growth of 7.7%.
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Despite the positives, softness in the Allegion Americas segment, due to tepid demand for residential products, is concerning. Given current market conditions around new construction and consumer sentiment, it expects continued softness in demand for residential products.
Escalating cost of goods sold has also been a major concern for the company. Despite the cost-cutting measures undertaken in the first nine months, its cost of sales increased 8.2% year over year due to a rise in raw material costs. High costs pose a threat to the ALLE’s bottom line.
Stocks to Consider
We have highlighted a couple of better-ranked stocks, namely Alarm.com ALRM and Lakeland Industries LAKE, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alarm.com delivered a trailing four-quarter average earnings surprise of 35%. In the past 60 days, the Zacks Consensus Estimate for ALRM’s 2023 earnings has increased 12.4%. The stock has risen 19.6% in the past six months.
Lakeland Industries has a trailing four-quarter average earnings surprise of 38.4%. The consensus estimate for LAKE’s 2023 earnings has increased 8.6% in the past 60 days. Shares of the company have rallied 25.8% in the past three months.
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Stanley Black & Decker, Inc. (SWK) : Free Stock Analysis Report
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