Why Is Allegion (ALLE) Up 3.2% Since Last Earnings Report?
It has been about a month since the last earnings report for Allegion (ALLE). Shares have added about 3.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Allegion due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Allegion Q4 Earnings Top Estimates, Revenues Up Y/Y
Allegion’s fourth-quarter 2023 adjusted earnings of $1.68 per share beat the Zacks Consensus Estimate of $1.57. The bottom line improved 5% year over year.
Revenue Details
In the quarter under review, Allegion’s revenues were $897.4 million, increasing 4.2% from the year-ago quarter. Organic sales in the quarter increased 2.6% due to solid growth in the company’s non-residential business. However, Allegion’s revenues missed the Zacks Consensus Estimate of $913 million.
Acquired assets boosted sales by 0.6%. Forex woes left a positive impact of 1% on revenues.
Allegion reports revenues under two segments. A brief discussion of the quarterly results is provided below:
Revenues from Allegion Americas increased 3.7% year over year to $704.6 million. The figure accounted for 78.5% of the quarter’s sales. Our estimate for segmental revenues was $716.9 million.
Operating income was $175.0 million for the quarter, up 11.6% year over year. Our estimate for the quarter was $174.5 million.
Revenues from Allegion International were $192.8 million in the quarter, up 5.9% year over year. The metric accounted for 21.5% of the quarter’s sales. Our estimate for segmental revenues was $195.3 million.
Organic sales decreased 1.3% year over year while foreign currency translation had a positive impact of 4.4% on sales. Operating income was $17.9 million for the quarter, down 22.3% year over year. Our estimate for the quarter was $21.2 million.
Margin Profile
In the reported quarter, Allegion’s cost of sales increased 0.3% year over year to $512.1 million. The gross profit increased 9.9% year over year to $385.3 million while the gross margin jumped 220 basis points (bps) to 42.9%.
Selling and administrative expenses increased 14% year over year to $218.1 million. Adjusted EBITDA was $197.3 million, reflecting a year-over-year increase of 10.7%. The margin grew 190 bps year over year to 28%.
The adjusted operating income in the quarter increased 10.8% year over year to $188.4 million. The adjusted margin was 26.7%, up 170 bps.
Interest expenses were $22.9 million, down 3.4% year over year. The effective tax rate in the quarter was 13.4%, up from 3.4% in the year-ago quarter.
Balance Sheet and Cash Flow
While exiting the fourth quarter of 2023, Allegion had cash and cash equivalents of $468.1 million compared with $288.0 million at the end of fourth-quarter 2022. Long-term debt was $1.6 billion compared with $2.1 billion reported at the end of fourth-quarter 2022.
In 2023, Allegion generated net cash of $600.6 million from operating activities, increasing 30.7% from the previous year’s level. Capital expenditure was $84.2 million, increasing 31.6% year over year. The free cash flow was $516.4 million for 2023.
In the same period, Allegion repurchased shares for $59.9 million, down 1.8% year over year. Dividends paid out totaled $158.7 million, reflecting an increase of 10.3% from the previous year’s level.
2024 Outlook
It expects revenues to increase 1.5-3.5% year over year in 2024. The company anticipates organic sales of 1-3%.
Earnings are predicted to be $6.45-$6.60 per share for 2024. Adjusted earnings are expected to be $7.00-$7.15 per share. The Zacks Consensus Estimate for the same is $6.69 per share.
The company expects a free cash flow of $540-$570 million. The tax rate in the year is expected to be 18-19%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, Allegion has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Allegion has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Allegion PLC (ALLE) : Free Stock Analysis Report
