Here's Why You Should Hold Allegion (ALLE) in Your Portfolio

Allegion plc ALLE has been experiencing strength in its Americas segment driven by solid momentum in non-residential business. The segment’s revenues increased 3.7% in the fourth quarter of 2023. Also, its international segment is benefiting from solid demand environment in electronics and software solutions end markets. The international segment’s revenues grew 5.9% in the fourth quarter. For 2024, the company expects total revenues to grow 1.5-3.5% from the year-ago levels, while organic sales are expected to rise 1-3%.

The company intends to strengthen and expand its businesses through buyouts. In March 2024, Allegion acquired Montajes electronics Dorcas S.L. (“Dorcas”). The inclusion of Dorcas’ expertise in electric strikes and lock solutions, coupled with its strong innovation capabilities, will likely enable Allegion to boost its security products portfolio.

The company also acquired Livingston, Scotland-based Boss Door Controls in February 2024 expanding its UK Business with complementary portfolio and broader channel access. This apart, ALLE acquired Plano Group through one of its subsidiaries in January 2023. In 2023, acquisitions boosted the company’s sales by 7.9%.

Allegion remains committed to increasing shareholders’ value through dividend payment and share repurchases. It paid out dividends of $158.7 million in 2023, reflecting an increase of 10.3% year over year. In the year, it repurchased 0.5 million shares for $59.9 million.  Also, in February 2024, Allegion announced a 7% hike in its quarterly dividend rate.

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In the past three months, this Zacks Rank #3 (Hold) company has gained 17.8% compared with the industry’s 13.1% growth.

However, softness in the Americas segment, due to lower demand for residential products is worrisome. Given the current market conditions around new construction and consumer sentiment, the company expects continued softness in demand for residential products. Also, lower volumes in the mechanical portfolio may weigh on Allegion’s performance in the near term.

Escalating cost of goods sold has also been a major concern for ALLE. Despite cost-cutting measures, in 2023, its cost of sales increased 6.1% year over year due to an increase in raw material costs. Also, selling, general and administrative expenses jumped 17.6% in the year.

Key Picks

Some better-ranked stocks from the same space are presented below.

Napco Security Technologies, Inc. NSSC presently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NSSC delivered a trailing four-quarter average earnings surprise of 27.7%. In the past 60 days, the Zacks Consensus Estimate for Napco Security’s 2024 earnings has increased 16.1%.

MSA Safety Incorporated MSA sports a Zacks Rank #1. MSA delivered a trailing four-quarter average earnings surprise of 21.8%. In the past 60 days, the Zacks Consensus Estimate for its 2024 earnings has increased 4.3%.

Cadre Holdings, Inc. CDRE presently flaunts a Zacks Rank of 1. CDRE delivered a trailing four-quarter average earnings surprise of 45.6%. In the past 60 days, the Zacks Consensus Estimate for its 2024 earnings has increased 11%.

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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.

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