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Allegion (ALLE) Earnings & Revenues Surpass Estimates in Q3

Allegion plc ALLE has reported better-than-expected results for third-quarter 2020, wherein both adjusted earnings and revenues surpassed the Zacks Consensus Estimate.

Earnings Rise, Revenues Decline

Quarterly adjusted earnings were $1.67 per share, beating the Zacks Consensus Estimate of $1.20. Notably, the bottom line was 13.6% higher than the year-ago figure of $1.47. The improvement was driven by lower operating expenses.

Revenues totaled $728.4 million, down 2.7% year over year. However, the top line beat the consensus estimate of $664 million. Revenues fell 3.4% on an organic basis. The top-line performance was adversely impacted by the coronavirus outbreak-related issues.

Allegion PLC Price, Consensus and EPS Surprise

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

Segmental Breakup

Revenues in the Americas fell 5.1% year over year to $539.1 million, owing to softness in non-residential and electronics businesses.

EMEIA (Europe, Middle East, India and Africa) revenues grew 7.7% to $148.4 million on higher sales volume, partially offset by adverse impacts of divestitures.

Revenues in the Asia Pacific fell 4.2% to $40.9 million in the quarter, reflecting weak end markets in Korea, partially offset by positive market conditions in Australia.

Costs & Margins Details

In the third quarter, Allegion’s cost of sales decreased 0.9% year over year to $409.2 million. Gross profit fell 4.9% to $319.2 million, while gross margin contracted 100 basis points (bps) to 43.8%.

Selling and administrative expenses decreased 6.7% year over year to $156.2 million.

Adjusted operating margin expanded 20 bps to 23.3%.

Balance Sheet & Cash Flow

As of Sep 30, 2020, Allegion had cash and cash equivalents of $428.9 million, up from $355.3 recorded on Dec 31, 2019.  Long-term debt was $1,428.9 million, up from $1,427.6 million recorded at the end of 2019.

In the first nine months of 2020, the company generated net cash of $289.4 million from operating activities compared with $279.4 million in the year-ago comparable period. Capital expenditure totaled $33.3 million compared with $49.4 million in the year-ago period.

2020 Guidance

Allegion provided its financial outlook for 2020.

Adjusted earnings per share are expected to be $4.75 to $4.80 compared with $4.15-$4.30 guided earlier.

The company expects 2020 revenues to decline 6-6.5% on both reported and organic basis.

Adjusted effective tax rate is anticipated to be approximately 13% for the year.

Available cash flow is expected to be $400-$420 million.

Zacks Rank & Other Stocks to Consider

The company currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the Zacks Industrial Products sector are ABB Ltd ABB, Altra Industrial Motion Corp. AIMC and Fortune Brands Home Security, Inc. FBHS, each currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ABB delivered a positive earnings surprise of 100.00% in the last reported quarter.

Altra Industrial delivered a positive earnings surprise of 31.43%, on average, in the trailing four quarters.

Fortune Brands delivered a positive earnings surprise of 19.44%, on average, in the trailing four quarters.

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