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Behind the brand:

'Boutique hotel at sea': Virgin Voyages CEO hails Branson's 'biggest endeavour'

On board entrepreneur's latest venture

Allegion (ALLE) Q4 Earnings Meet Estimates, Revenues Miss

Zacks Equity Research

Allegion plc’s ALLE fourth-quarter 2019 adjusted earnings came in line with estimates, while revenues missed the same.

Earnings/Revenues

Quarterly adjusted earnings came in at $1.28 per share, meeting the Zacks Consensus Estimate. Notably, the bottom line was 4.9% higher than the year-ago figure of $1.22. The upside can be primarily attributed to solid sales growth and improved operating income.

In full-year 2019, Allegion’s adjusted earnings came in at $4.89 per share, up 8.7% on a year-over-year basis.

Revenues totaled $719.5 million, up 2.4% year over year. However, the top line missed the consensus estimate of $740 million. Revenues jumped 3.5% on an organic basis. The rise was backed by strength in businesses in the Americas region and strong pricing benefits, partially offset by adverse impact of unfavorable foreign exchange movements.

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In 2019, Allegion generated revenues of $2,854 million, up 4.5% on a year-over-year basis.

Allegion plc Price, Consensus and EPS Surprise

Allegion PLC Price, Consensus and EPS Surprise
Allegion PLC Price, Consensus and EPS Surprise

Allegion plc price-consensus-eps-surprise-chart | Allegion plc Quote

Segmental Breakup

Revenues in the Americas rose 6.8% year over year to $526.3 million, driven by strength in non-residential and residential businesses. EMEIA (Europe, Middle East, India and Africa) revenues declined 5% to $149.6 million, on account of adverse impacts of divestitures and unfavorable foreign exchange movements. Revenues in Asia-Pacific fell 16.6% to $43.6 million in the quarter, reflecting weak residential end markets in Australia and market softness in China.

Costs/Margins

In the fourth quarter, Allegion’s cost of sales decreased 0.4% year over year to $400.3 million. Gross profit grew 6.2% to $319.2 million while gross margin improved 160 basis points (bps) to 44.4%.

Selling and administrative expenses increased 10.6% year over year to $175.9 million.

Adjusted operating margin expanded 30 bps to 21%.

Balance Sheet/Cash Flow

As of Dec 31, 2019, Allegion had cash and cash equivalents of $355.3 million, up from $283.8 recorded on Dec 31, 2018.  Long-term debt was $1,427.6 million, up from $1,409.5 million recorded at the end of 2018.

In 2019, the company generated net cash of $488.2 million from operating activities, up 6.6% on a year-over-year basis. Capital expenditures totaled $65.6 million compared with $49.1 million a year ago.

2020 Guidance

Adjusted earnings per share are expected in the range of $5.10 to $5.20, reflecting an increase of 5.3% on a year-over-year basis.

The company expects full-year 2020 revenue growth in the band of 3-4% on reported basis, and 3.5-4.5% on an organic basis.

Full-year adjusted effective tax rate is anticipated to be 16.5-17%.

Available cash flow is expected to be $450-$470 million.

Zacks Rank & Key Picks

Allegion currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Intellicheck, Inc. IDN, Alarm.com Holdings, Inc. ALRM and Johnson Controls International plc JCI. While Intellicheck sports a Zacks Rank #1 (Strong Buy), Alarm.com Holdings and Johnson Controls carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intellicheck delivered earnings surprise of 4.76%, on average, in the trailing four reported quarters.

Alarm.com Holdings pulled off positive earnings surprise of 16.93%, on average, in the previous four reported quarters.

Johnson Controls delivered earnings surprise of 4.43%, on average, in the trailing four reported quarters.

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