Markets

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

Allegion plcALLE , a security solution provider for homes and businesses, is scheduled to report fourth-quarter and full-year 2015 results on Feb 11, before the opening bell.

Last quarter, Allegion posted a positive earnings surprise of 19.48%. In fact, the company has surpassed earnings estimates in three out of the trailing four quarters, with an average beat of 9.14%.

Let's see how things are shaping up for the upcoming announcement.

Factors to Consider

Allegion's products sales are primarily dependent the U.S. commercial and residential construction and remodeling markets. Thus, the company is likely to benefit as the U.S. housing market performed well toward the end of 2015, mainly on the back of the resurgence in the job market and low mortgage rates. The strength in the U.S. housing market should drive Allegion's fourth-quarter revenues.

The company also stands to benefit from its strategic acquisitions, collaborations and investments in new technology, as demand in the electronic security products market is currently growing by leaps and bounds. The acquisitions of Axa Stenman, a European residential and portable security provider, and SimonsVoss, a leading lock manufacturer based in Europe, both of which were completed in Sep 2015, should boost revenues in the continent.

Additionally, we expect margin expansion supported by prudent cost control and productivity initiatives, specific customer and market pricing actions, and the elimination of unprofitable businesses.

However, we are concerned about the economic slowdown in certain pockets of the globe, where Allegion has considerable presence. The prevailing economic sluggishness in the Eurozone and China's persistent downturn are likely to keep Allegion's international profits under pressure in the to-be-reported quarter. Further, owing to the company's substantial international presence, the strong dollar will be a significant top-line headwind in the upcoming quarter.

Earnings Whispers

Our proven model does not conclusively show that Allegion is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP : The Earnings ESP for Allegion is -1.35%. This is because the Most Accurate estimate is pegged at 73 cents, a penny lower than the Zacks Consensus Estimate.

Zacks Rank : Allegion's Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some stocks in the broader industrial products sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

The Manitowoc Company, Inc. MTW , with an Earnings ESP of +11.11% and a Zacks Rank #2.

Vertex Energy, Inc. VTNR , with an Earnings ESP of +5.88 and a Zacks Rank #2.

Brady Corp. BRC , with an Earnings ESP of +13.64% and a Zacks Rank #3.

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 >>

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

MANITOWOC INC (MTW): Free Stock Analysis Report

VERTEX ENERGY (VTNR): Free Stock Analysis Report

BRADY CORP CL A (BRC): Free Stock Analysis Report

ALLEGION PLC (ALLE): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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


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

In This Story

ALLE VTNR BRC MTW

Other Topics

Earnings Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More