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Allegion (ALLE) to Post Q2 Earnings: Is a Beat in the Cards?

Zacks Equity Research
·4 mins read

Allegion plc ALLE is slated to report second-quarter 2020 results on Jul 23, before market open.

The company delivered better-than-expected results twice in the last four quarters, while missing and meeting estimates once each. Earnings surprise for the last four quarters was 5.25%, on average. Notably, Allegion’s first-quarter 2020 adjusted earnings of $1.04 per share surpassed the Zacks Consensus Estimate of 91 cents by 14.29%.

In the past three months, the company has gained 15.7% compared with the industry’s growth of 30.5%.

 



 

Factors at Play

Allegion is expected to have gained from incremental investments for product development and channel initiatives in the second quarter. Also, the company’s continued focus on improving operational efficiency along with its pricing and productivity actions are expected to have fueled growth. In addition, some of its actions during the second quarter, including the reduction of discretionary expenses, eliminating unnecessary investments, a hiring freeze and re-prioritization of its capital expenditure, are anticipated to have helped it maintain a healthy margin performance.

Coming to operating segments, the company’s solid non-residential and residential businesses, led by strength in institutional end markets, are likely to have supplemented the Americas segment’s sales. In addition, strength in the electronics business is likely to have augmented the segment’s sales. However, the overall low demand environment, owing to the coronavirus outbreak-led issues, is expected to have had a bearing on its top-line performance. Amid this backdrop, the Zacks Consensus Estimate for second-quarter 2020 revenues of the Americas segment is currently pegged at $443 million, suggesting a decline of 18.7% from the year-ago reported number.

Also, the company’s initiatives to boost customer service and address the cost structure are expected to have acted as tailwinds for its Europe, Middle East, India and Africa (EMEIA), and Asia Pacific segments. However, the coronavirus outbreak-induced market downturn and forex woes are expected to have adversely impacted both segments’ top-line performance. Also, persistent softness in the residential markets in Australia is anticipated to have adversely impacted the Asia Pacific segment’s top-line performance. Notably, the consensus estimate for second-quarter revenues from the EMEIA segment currently stands at $113 million, indicating a 20.4% year-over-year decrease, whereas that for the Asia Pacific segment is currently pegged at $36.5 million, indicating a decline of 16.9% from the year-ago reported figure.

Earnings Whispers

Our proven model provides some idea on the stocks that are about to release earnings results. Per the model, a stock needs to have a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The case with Allegion is given below:

Earnings ESP: The company has an Earnings ESP of +2.27% as the Most Accurate Estimate is pegged at 79 cents, higher than the Zacks Consensus Estimate of 77 cents.

Allegion PLC Price and EPS Surprise

 

Allegion PLC Price and EPS Surprise
Allegion PLC Price and EPS Surprise

Allegion PLC price-eps-surprise | Allegion PLC Quote

Zacks Rank: Allegion carries a Zacks Rank #2, which when combined with a positive ESP, makes us confident of an earnings beat.

Conversely, we caution against stocks with a Zacks Ranks #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Other Key Picks

Here are some other companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Colfax Corporation CFX has an Earnings ESP of +33.33% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Donaldson Company, Inc. DCI currently has a Zacks Rank #3 and an Earnings ESP of +6.02%.

Emerson Electric Co. EMR presently has a Zacks Rank #3 and an Earnings ESP of +2.60%.

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Emerson Electric Co. (EMR) : Free Stock Analysis Report
 
Colfax Corporation (CFX) : Free Stock Analysis Report
 
Donaldson Company, Inc. (DCI) : Free Stock Analysis Report
 
Allegion PLC (ALLE) : Free Stock Analysis Report
 
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