Allegion (ALLE) Q2 Earnings and Revenues Beat Estimates
Allegion plc ALLE reported better-than-expected results for second-quarter 2022. ALLE’s earnings surpassed the Zacks Consensus Estimate by 3% and sales beat the same by 0.4%.
Adjusted earnings in the quarter under review were $1.37 per share, surpassing the Zacks Consensus Estimate of $1.33. The bottom line increased 3.8% from the year-ago period’s figure of $1.32.
Revenue Details
In the quarter under review, Allegion’s revenues were $773.1 million, reflecting growth of 3.5% from the year-ago quarter’s figure. Organic sales in the quarter increased 6.4%, while acquired assets boosted sales 0.1%. Forex woes left an adverse impact of 3%. Allegion’s revenues surpassed the Zacks Consensus Estimate of $770 million.
ALLE reported revenues under two segments. A brief discussion on the quarterly results is provided below:
Revenues from Allegion Americas increased 7.8% year over year to $592.3 million. ALLE accounted for 76.6% 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 shortage of electronics and other parts were spoilsports in the quarter.
Organic sales increased 8% year over year.
Revenues from Allegion International were $180.8 million in the quarter, decreasing 8.5% year over year. The metric accounted for 23.4% of the quarter’s sales.
Organic sales increased 1.9% year over year, while foreign currency translation had a negative impact of 10.9% on sales. Acquired assets boosted sales 0.5%.
Allegion PLC Price and Consensus
Allegion PLC price-consensus-chart | Allegion PLC Quote
Margin Profile
In the reported quarter, Allegion’s cost of sales grew 7.3% year over year to $458.1 million. The cost of sales was 59.3% of the quarter’s net sales. The gross profit decreased 1.7% year over year to $315 million, while the gross margin contracted 220 basis points (bps) to 40.7%.
Selling and administrative expenses decreased 4.1% year over year to $167.9 million. The metric represented 21.7% of net sales in the reported quarter compared with 23.4% in the year-ago period. Adjusted earnings before interest, tax, depreciation and amortization were $173.9 million, reflecting a year-over-year increase of 9.9%. Margin increased 30 bps year over year to 22.5%.
The adjusted operating income in the quarter increased 5.3% year over year to $154.9 million. The adjusted margin was 20%, up from 19.6% a year ago. The results were attributable to the favorable impact of price and productivity. This was partially offset by cost inflation related to material, freight and incremental investments.
Interest expenses were $17.2 million, up 38.7% year over year. The effective tax rate in the quarter was 13.6%, up from 12.8% in the year-ago quarter.
Balance Sheet and Cash Flow
While exiting the second quarter, Allegion had cash and cash equivalents of $919.6 million, up 131.1% from $397.9 million at the end of fourth-quarter 2021. Long-term debt increased 41.2% to $2,018.1 million from $1,429.5 million at the end of fourth-quarter 2021.
In the first six months of 2022, ALLE generated net cash of $109.1 million from operating activities, decreasing 59.2% from the previous year’s level. Capital expenditure was $24.6 million, increasing 37.4% year over year. The free cash flow was $84.5 million for the first six months of 2022.
In the first six months of the year, Allegion repurchased shares worth $61.0 million, decreasing 69.5% year over year. Dividends paid out in the year totaled $71.5 million, reflecting an increase of 10.7% from the previous-year’s level.
Outlook
For 2022, Allegion adjusted its full-year revenue growth to 13-14% from the earlier issued projection of 7.5-9%. Organic sales are expected to rise 9-10% from 8.5-10% projected earlier.
Earnings are predicted to be $5.05-$5.15 per share compared with $5.50-$5.70 projected earlier. Adjusted earnings are likely to be $5.35-$5.45 per share compared with the earlier projection of $5.55-$5.75.
Incremental investment is expected to be 20 cents per share. Free cash flow for the year is anticipated to be $420-$440 compared with the previous projection of $470-$490 million. The tax rate in the year is expected to be 13%.
Zacks Rank & Stocks to Consider
Allegion currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the industrial products sector are discussed below:
Greif, Inc. GEF presently sports a Zacks Rank #1 (Strong Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
GEF’s earnings estimates have increased 17.8% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have risen 16.6% in the past six months.
Titan International, Inc. TWI presently flaunts a Zacks Rank of 1. Its earnings surprise in the last four quarters was 56.4%, on average.
In the past 60 days, TWI’s earnings estimates have increased 43.3% for 2022. The stock has surged 65.2% in the past six months.
Valmont Industries, Inc. VMI presently has a Zacks Rank #2 (Buy). VMI’s earnings surprise in the last four quarters was 13.7%, on average.
In the past 60 days, the stock’s earnings estimates have increased 3.8% for 2022. The stock has risen 18.8% in the past six months.
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