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Can Allegion (ALLE) Beat Q2 Earnings on Solid US Revenues? - Analyst Blog

Allegion plcALLE , a provider of security solutions for homes and businesses, is set to report second-quarter 2015 results on Jul 30, before the opening bell.

Last quarter, the company posted a positive earnings surprise of 8.51%, primarily driven by an increase in revenues in the Americas and Asia Pacific segments which offset the lower EMEIA revenues. In fact, Allegion has posted a positive earnings surprise in three out of the trailing four quarters with a positive average surprise of 4.66%.

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

Factors to Consider

Allegion primarily relies on the U.S. commercial and residential construction and remodeling markets for its revenues. The company is likely to benefit from this substantial exposure as the U.S. housing market is picking up momentum of late.

The resurgence in the job market and low mortgage rates are the key factors that support the housing recovery. The recovery in the U.S. housing market should drive Allegion's revenues in the to-be-reported quarter. Moreover, softer mortgage rates are reducing the cost of homes, which would thereby boost demand for Allegion's products.

The company also stands to benefit from the strategic acquisitions and investments in new technology, as demand in the electronic security products market is currently growing by leaps and bounds.

However, we are concerned about the economic slowdown in certain pockets of the globe, where Allegion has considerable presence. With the economy in Eurozone still sluggish and China's continued slowdown, Allegion's profits in the second quarter might be under pressure.

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 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 71 cents.

Zacks Rank : Allegion has a Zacks Rank #1 (Strong Buy), which when combined with a 0.00% ESP makes surprise prediction difficult.

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:

Owens-Illinois, Inc. OI , with an Earnings ESP of +1.72% and a Zacks Rank #3.

Rockwell Automation Inc. ROK , with an Earnings ESP of +3.90% and a Zacks Rank #2.

TASER International Inc. TASR , with an Earnings ESP of +22.22% and a Zacks Rank #3.

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OWENS-ILLINOIS (OI): Free Stock Analysis Report

ROCKWELL AUTOMT (ROK): Free Stock Analysis Report

TASER INTL INC (TASR): Free Stock Analysis Report

ALLEGION PLC (ALLE): Free Stock Analysis Report

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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.


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

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