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What to Expect From Allegion (ALLE) This Earnings Season

Zacks Equity Research

Allegion plc ALLE is slated to report second-quarter 2019 results on Jul 25, before market open.

The company delivered average positive earnings surprise of 1.95% in the trailing four quarters, beating estimates all through. Notably, Allegion’s first-quarter 2019 adjusted earnings of 88 cents per share surpassed the Zacks Consensus Estimate of 87 cents by 1.15%.

In the past three months, the company’s shares have returned 12.5% compared with 6.2% growth recorded by the industry it belongs to.

Let’s see how things are shaping up prior to this announcement.

Factors to Influence Q2 Results

Allegion is well positioned to benefit from its incremental investments for new products development, channel initiatives, demand creation spending and strategic business acquisitions in the second quarter. In addition, the company’s focus on improving operational efficiency, along with its ongoing pricing actions and new market partnerships will stoke growth.

Coming to operating segments, solid momentum in non-residential end markets, driven by strength in institutional verticals and strong demand for its electronic products like Schlage Encode residential lock are likely to be tailwinds for the Americas segment. Nevertheless, this will be partially offset by continued weakness in the residential market. Amid this backdrop, the Zacks Consensus Estimate for second-quarter 2019 revenues of Allegion’s Americas segment is currently pegged at $547 million, higher than $527 million recorded in the year-ago quarter.

Also, strength in the electronic business led by the company’s SimonsVoss and Interflex units is likely to drive revenues of the Europe, Middle East, India and Africa (EMEIA) segment for the second quarter. However, weaknesses in Southern Europe might adversely impact the segment’s performance. Notably, the consensus estimate for second-quarter revenues from EMEIA segment currently stands at $152 million, indicating 2.7% growth from the year-earlier reported figure.

For Asia-Pacific, the company expects strength in China and the acquisition of GWA Door and Access business (completed in July 2018) to boost Asia-Pacific segment’s revenues. However, weakness in Australia and New Zealand markets might offset it. The consensus estimate for second-quarter revenues from Asia Pacific segment is currently pegged at $41.5 million, higher than $30.1 million recorded in the year-earlier quarter.

However, rising cost of sales is a major cause of concern for Allegion. Notably, in the first quarter, the company’s cost of sales increased 6.4% year over year.

Earnings Whispers

Our proven model provides some idea on the stocks that are about to release their 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 at least 3 (Hold) for a likely earnings beat.

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

That is not the case here as we will see below.

Earnings ESPAllegion has an Earnings ESP of -1.07% as the Most Accurate Estimate is pegged at $1.30, lower than the Zacks Consensus Estimate of $1.31.

Allegion PLC Price and EPS Surprise

Allegion PLC Price and EPS Surprise

Allegion PLC price-eps-surprise | Allegion PLC Quote

Zacks Rank: The company carries a Zacks Rank #2, which increases the predictive power of ESP. However, its negative ESP makes surprise prediction difficult.

It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

AptarGroup, Inc. ATR has an Earnings ESP of +0.56% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dover Corporation DOV has an Earnings ESP of +1.65% and a Zacks Rank #2.

Avery Dennison Corporation AVY has an Earnings ESP of +0.90% and a Zacks Rank #3.

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