Allegion to Benefit From Strong End Markets, Risks Remain
On Sep 10, we issued an updated research report on Allegion plc ALLE.
In the past six months, this Zacks Rank #3 (Hold) stock has yielded a return of 10.6% compared with the industry’s growth of 6.6%.
Allegion has been benefiting from strength in its non-residential business, led by institutional markets in the Americas and acquisition gains. As a matter of fact, the company expects these tailwinds to continue bolstering its revenues in the rest of 2019. It believes that healthy demand for its electronic products, led by Simons Voss and Interflex businesses along with improvement in the residential business will benefit the top line. Notably, for 2019, the company expects revenue growth on both reported and organic basis in the band of 4.5-5.5%.
Also, Allegion believes that collaborations with industry partners, greater operational efficacy and its pricing actions will bolster the bottom line. For 2019, it anticipates adjusted earnings per share to be in the range of $4.80 to $4.90 compared with previously estimated $4.75 to $4.90.
Moreover, the company remains committed to rewarding shareholders handsomely through dividend payments and share repurchase programs. Notably, in the second quarter of 2019, the company repurchased shares worth approximately $69.8 million. It is worth noting that the quarterly dividend rate was hiked 29% in February 2019. Such diligent capital deployment strategies boost shareholders' wealth.
However, the company has been dealing with rising costs of sales over the past few quarters. For instance, in the first and second quarter of 2019, the company's cost of sales jumped 6.4% and 2.9%, respectively, on a year-over-year basis. Notably, high material cost is escalating its aggregate costs of late. Rising costs, if unchecked, will continue to dent Allegion's margins in the quarters ahead.
In addition, analysts have become increasingly bearish on the company over the past couple of months. Consequently, the Zacks Consensus Estimate for 2019 earnings has trended down from $4.84 to $4.83.
Some better-ranked stocks from Zacks Industrial Products sector are Cintas Corporation CTAS, DXP Enterprises, Inc. DXPE and Graham Corporation GHM. All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cintas delivered a positive average earnings surprise of 6.27% in the trailing four quarters.
DXP Enterprises pulled off a positive average earnings surprise of 18.06% in the trailing four quarters.
Graham’s earnings surprise in the last reported quarter was 100.00%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click to get this free report
Cintas Corporation (CTAS): Free Stock Analysis Report
Graham Corporation (GHM): Free Stock Analysis Report
DXP Enterprises, Inc. (DXPE): 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.