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Allegion (ALLE) Q1 Earnings Top Estimates, 2022 View Solid

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·5 min read
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Allegion plc ALLE reported better-than-expected results for first-quarter 2022. ALLE’s earnings surpassed the Zacks Consensus Estimate by 8.1% and sales beat the same by 4%.

Adjusted earnings in the quarter under review were $1.07 per share, surpassing the Zacks Consensus Estimate of 99 cents. However, the bottom line declined 10.8% from the year-ago figure of $1.20, as supply-chain woes, and shortages of electronics and other parts adversely impacted sales. High costs and expenses added to the woes.

Revenue Details

In the quarter under review, Allegion’s revenues were $723.6 million, reflecting growth of 4.2% from the year-ago quarter’s figure. Organic sales in the quarter increased 6.4%, while forex woes left an adverse impact of 1.9%. Acquisitions/divestitures lowered sales 0.3%. Allegion’s revenues surpassed the Zacks Consensus Estimate of $696 million.

The company reported revenues under two segments. A brief discussion on the quarterly results is provided below:

Revenues from Allegion Americas increased 5.9% year over year to $528.2 million. ALLE accounted for 73% of the quarter’s sales. Lower sales from the residential business were partially offset by gains in the non-residential business. Supply-chain constraints, and electronics and other parts’ shortages were spoilsports in the quarter.

Organic sales increased 5.9% year over year

Revenues from Allegion International were $195.4 million in the quarter and flat year over year. The metric accounted for 27% of the quarter’s sales.

Organic sales increased 7.6% year over year while foreign currency translation had a negative impact of 6.8% on sales.

 

Allegion PLC Price, Consensus and EPS Surprise

Allegion PLC Price, Consensus and EPS Surprise
Allegion PLC Price, Consensus and EPS Surprise

Allegion PLC price-consensus-eps-surprise-chart | Allegion PLC Quote

Margin Profile

In the reported quarter, Allegion’s cost of sales grew 9.6% year over year to $ 434.9 million. The cost of sales was 60.1% of the quarter’s net sales. The gross profit decreased 2.9% year over year to $ 288.7 million, while the gross margin contracted 293 basis points (bps) to 39.9%.

Selling and administrative expenses increased 3.4% year over year to $171.7million. The metric represented 23.7% of net sales in the reported quarter compared with 23.9% in the year-ago period. Adjusted earnings before interest, tax, depreciation and amortization were $141.9 million, reflecting a year-over-year decrease of 7.9%. Margin decreased 260 bps year over year to 19.6%.

The adjusted operating income in the quarter decreased 8.6% year over year to $122.5 million. The adjusted margin was 16.9%, down from 19.3% a year ago. The results suffered cost inflation related to material, freight, incremental investments and operational inefficiencies. This was partially offset by the impacts of volume leverage.

Interest expenses were $11.9 million, down 3.3% year over year. The effective tax rate in the quarter was 13.2%, up from 11.7% in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the first quarter, Allegion had cash and cash equivalents of $305.1 million, down 23.3% from $397.9 million at the end of the previous quarter. Long-term debt decreased 0.2% to $1,426.8 million from $1,429.5 million in the previous quarter.

In the first three months of 2022, ALLE generated net cash of $20.5 million from operating activities, decreasing 81.7% from the previous year’s level. Capital expenditure was $8.7 million, increasing 38.1% year over year. The free cash flow was $11.8 million for the first three months of 2022.

In the first three months of the year, Allegion repurchased 0.5 million shares for $61.0 million, decreasing 59.3% year over year. Dividends paid out in the year totaled $35.8 million, reflecting an increase of 10.2% from the previous-year quarter’s level.

Outlook

For 2022, Allegion anticipates benefiting from strengthening end-market demand and margin improvements. Effective pricing actions will be helpful throughout the year. On a sequential basis, ALLE expects improvements in revenues, margins and earnings.

Allegion adjusted its full-year revenue growth to 7.5-9% from the earlier issued projection of 6-7.5%. Organic sales are expected to rise 8.5-10%. Adjusted earnings are likely to be $5.55-$5.75 per share. Incremental investment is expected to be 15-20 cents per share. Free cash flow for the year is anticipated to be $470-$490 million. The tax rate in the year is expected to be 13%.

Zacks Rank & Stocks to Consider

With a market capitalization of $10 billion, ALLE currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies from the industrial products sector are discussed below.

Roper Technologies, Inc. ROP presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2.03%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, earnings estimates for ROP earnings have increased 0.2% for 2022. The stock has increased 8.3% in the past three months.

Donaldson Company, Inc. DCI presently carries a Zacks Rank of 2. DCI delivered a trailing four-quarter earnings surprise of 4.2%, on average.

Earnings estimates for DCI have increased 0.7% for fiscal 2022 (ending July 2022) in the past 60 days. Its shares have decreased 8.5% in the past three months.

Ferguson plc FERG is presently Zacks #2 Ranked. FERG’s earnings surprise in the last four quarters was 14.2%, on average.

In the past 60 days, the stock’s earnings estimates have increased 7% for fiscal 2022 (ending July 2022). The same has declined 18.7% in the past three months.


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