Technology

Allegion (ALLE) to Report Q1 Earnings: What's in the Cards?

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

The company pulled off average positive earnings surprise of 0.47% in the preceding four quarters, beating estimates thrice. Notably, Allegion’s fourth-quarter 2018 adjusted earnings of $1.22 per share outpaced the Zacks Consensus Estimate of $1.21 by 0.83%.

In the past three months, the company’s shares have returned 14% compared with 13% growth recorded by the industry it belongs to.

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

Factors at Play

Allegion is likely to gain from its continuous effort on new products development, channel initiatives and strategic business acquisitions in the first quarter. The company will also benefit from its greater operational efficacy, ongoing pricing actions and diligent cost-cutting initiatives in the quarter.

Allegion has not provided any separate projection for the first quarter. However, a look at the yearly forecast will fairly provide a picture for the same. For 2019, the company anticipates adjusted earnings within $4.75-$4.90, reflecting an increase of 6% to 9% year over year. The company currently expects revenue growth on both reported and organic basis in the band of 5-6%.

Coming to operating segments, strong momentum in nonresidential end markets, led by strength in institutional verticals are likely to be tailwinds for the Americas segment. However, operating results will be partially marred by weakness in the residential new construction market. In this backdrop, the Zacks Consensus Estimate for first-quarter 2019 revenues of Allegion’s Americas segment is currently pegged at $465 million, higher than $439 million recorded in the year-ago quarter.

For EMEA, strength in the electronics business is likely to drive its revenues in the quarter, while weaknesses in Southern Europe and the United Kingdom might adversely impact its performance.Notably, the consensus estimate for first-quarter revenues from EMEA segment currently stands at $156 million, indicating 4% growth from the year-ago reported figure.

For Asia-Pacific, strength in China, coupled with the buyout of GWA Door and Access business (completed in July 2018) is likely to boost the near-term top-line performance of the Asia-Pacific segment. However, weakness in Australia and New Zealand markets might dent the segment’s revenue performance. Notably, the consensus estimate for first-quarter revenues from Asia Pacific segment currently stands at $35.1 million, suggesting 48.1% rise.

However, incremental investments in organic growth for developing new products, channel strategies and demand creation spending might drag down near-term margins of the company in the first quarter. Integration costs associated with the acquisitions might also continue to dampen the company’s profitability in the quarter.

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 0.00%, as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 87 cents.

Allegion PLC Price and EPS Surprise

Allegion PLC Price and EPS Surprise | Allegion PLC Quote

Zacks Rank: The company carries a Zacks Rank #3, which when combined with ESP of 0.00% 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.

Key Picks

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:

Axon Enterprise, Inc AAXN has an Earnings ESP of +6.99% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Regal Beloit Corporation RBC has an Earnings ESP of +2.13% and a Zacks Rank #3.

Colfax Corporation CFX has an Earnings ESP of +0.91% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.