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Allegion (ALLE) to Report Q4 Earnings: What's in the Offing?

Zacks Equity Research

Allegion plc ALLE is slated to report fourth-quarter 2019 results on Feb 18, before market open.

The company delivered positive earnings surprise of 2.17%, on average, in the trailing four quarters, surpassing estimates thrice. Allegion’s third-quarter 2019 adjusted earnings of $1.47 per share beat the Zacks Consensus Estimate of $1.33 by 10.53%.

In the past six months, the company’s shares have returned 44.4% compared with 12.3% growth recorded by the industry it belongs to.



Key Factors

Allegion is likely to have benefited from its incremental investments for new products development, channel initiatives and demand creation in the fourth quarter. Also, the company’s continued focus on improving operational efficiency, along with its ongoing pricing actions and market partnerships might have stoked growth.

Coming to operating segments, solid momentum in non-residential end markets, driven by strength in institutional markets and robust demand for its electronic products like Schlage Encode residential lock, is likely to have supplemented the Americas segment’s sales. Also, improving residential markets in the Americas are likely to have boosted the segment. Amid this backdrop, the Zacks Consensus Estimate for fourth-quarter 2019 revenues of Americas segment is currently pegged at $533 million, reflecting growth of 8.2% from the year-ago reported number.

Also, strong demand across most of its product lines is likely to have boosted revenues of the Europe, Middle East, India and Africa (EMEIA) segment in the fourth quarter. However, forex woes might have adversely impacted its top-line performance. The consensus estimate for fourth-quarter revenues from EMEIA segment currently stands at $159 million, indicating 1% growth on a year-over-year basis.

The company expects continued softness in the residential markets in Australia along with forex woes to adversely impact the Asia-Pacific segment’s top-line performance. The consensus estimate for fourth-quarter revenues from the segment is currently pegged at $48.3 million, indicating a decline of 7.6% from the year-ago reported figure.

In addition, escalating cost of sales remains a persistent concern for Allegion. In the second and third quarters of 2019, the company's cost of sales jumped 2.9% and 2.7%, respectively, year over year. High costs might have adversely impacted the company’s margin and profitability in the to-be reported as well.

Earnings Whispers

According to our quantitative model a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or at least 3 (Hold) to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

But that is not the case here as we will see below.

Earnings ESP: Allegion has an Earnings ESP of -0.98% as the Most Accurate Estimate is pegged at $1.27, lower than the Zacks Consensus Estimate of $1.28.

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 #3.

Key Picks

Alarm.com Holdings, Inc. ALRM carries a Zacks Rank #2 and has an Earnings ESP of +1.15%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nordson Corporation NDSN has an Earnings ESP of +2.10% and a Zacks Rank #2.

Tennant Company TNC carries a Zacks Rank #2 and has an Earnings ESP of +4.20%.

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