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What's in Store for Allegion (ALLE) This Earnings Season?

Allegion plcALLE - the leading global provider of security products and solutions for business and domestic purposes - is scheduled to release third-quarter 2017 results on Oct 26, before the market opens.

In the last reported quarter, the company had delivered a positive 11% earnings surprise. Notably, the company surpassed the Zacks Consensus Estimate in two of the last four quarters, resulting in an average earnings beat of 1.95%.

Let's see how things are shaping up prior to the upcoming quarterly release.

Factors at Play

In the first half of 2017, Allegion witnessed solid growth in its top line. Net revenues in the first half of 2017 were $1.18 billion, reflecting year-over-year growth of 8.1%. The Americas segment has been particularly driving the company's overall revenues. Accounting for 74.5% of total revenues in the first half of 2017, the segment's revenues increased 9.6%. On an organic basis, the Americas segment recorded first-half 2017 growth of 8% compared with 6.8% a year ago. The continued strength in revenues was driven by favorable price, low double-digit organic growth in residential markets, and solid performance in non-residential markets related to channel initiatives and new products. All these factors are expected to sustain revenue growth in the upcoming quarter as well.

Again, Allegion continues to benefit from its acquisition drive. In fact, in the second quarter of 2017, acquisitions contributed nearly 2%. The company broadens its product portfolio as well as geographic footprint and enhances its position in strategic market segments through buyouts. The acquisition of McKenzie-based Republic Doors & Frames is expected to expand its product line, improve operating efficiency and expand distribution footprint.

Moreover, the company revised its 2017 guidance upward during its second-quarter earnings call. The company now expects adjusted earnings per share in the range of $3.65-$3.80 versus the prior expectation of $3.60-$3.70. The company expects full-year 2017 revenue growth of 6.5% to 7.5% on a year-over-year basis, higher than 5.5% to 6.5% expected earlier. Organically, revenues are expected in the 6% to 7% range, compared to 5.5% to 6.5% expected earlier.

However, we are concerned about economic slowdown in certain pockets of the world where Allegion has considerable presence. Moreover, owing to the company's substantial international presence, volatile currency translations could prove to be a significant headwind. In fact, in the second quarter of 2017, the company navigated currency headwinds in the EMEIA region through significant acquisitions.

Notably, for the third quarter, the Zacks Consensus Estimate for earnings is pegged at $1.02 per share, reflecting a 9.4% year-over-year increase. Meanwhile, the consensus estimate for revenues is at $618.8 million, implying a year-over-year rise of 6.5%.

Moving forward, here is what our quantitative model predicts -

Allegion does not have the right combination of two key ingredients - a positive Earnings ESP and Zacks Rank #3 (Hold) or higher - which increases the odds of an earnings beat.

Zacks ESP : The Earnings ESP for Allegion is -0.74%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Allegion carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

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

Allegion PLC Price and EPS Surprise

Allegion PLC Price and EPS Surprise | Allegion PLC Quote

Stocks to Consider

Listed below are a few stocks in the Industrial Products sector which have the right conditions to post an earnings beat this quarter.

Briggs & Stratton Corporation BGG , with an Earnings ESP of +15.09% and a Zacks Rank #3, is slated to release quarterly results on Oct 25.

Barnes Group Inc. B carries a Zacks Rank #1 (Strong Buy) and has an Earnings ESP of +0.87%. You can see the complete list of today's Zacks #1 Rank stocks here .

The company's quarterly report is slated for release on Oct 27, before market open.

Kennametal Inc. KMT , with a Zacks Rank #2 and an Earnings ESP of +1.76%, will release quarterly results on Oct 25, before market open.

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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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