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    Allegion PLC (ALLE)

    Board Change

    Business Description

    Allegion plc is a leading global provider of security products and solutions, operating in two segments: Allegion Americas and Allegion International. The company offers a wide range of security products and solutions for commercial, institutional, and residential facilities worldwide, including education, healthcare, government, hospitality, retail, commercial office, and residential markets . Their product lines include mechanical products such as locks, locksets, portable locks, key systems, door controls, and exit devices, as well as electronic security products and access control systems, which encompass electrified locks, access control systems, and electronic door controls . Allegion's business strategy includes leveraging its strong brand portfolio, which includes well-known names like Schlage, Von Duprin, and LCN, to maintain a leading position in the security products industry .

    1. Mechanical Products - Offers a variety of security solutions including locks, locksets, portable locks, key systems, door controls, and exit devices for various markets.
    2. Electronic Security Products and Access Control Systems - Provides electrified locks, access control systems, and electronic door controls, catering to both residential and non-residential categories.
    3. Services and Software - Includes inspection, maintenance, repair, and SaaS offerings to support and enhance security product functionality.

    Q3 2024 Summary

    Initial Price$118.54July 1, 2024
    Final Price$144.97October 1, 2024
    Price Change$26.43
    % Change+22.30%

    What went well

    • Allegion is increasing its adjusted earnings per share outlook to a range of $7.35 to $7.45, reflecting strong operational performance in the third quarter.
    • The company is accelerating capital deployment, including the acquisition of SOSS Door Hardware, which is expected to deliver solid returns and be accretive to EPS in 2025.
    • Allegion anticipates organic growth in 2025, particularly in stable institutional markets showing signs of modest growth, and has a healthy balance sheet and strong cash generation to support future capital deployment and shareholder returns.

    What went wrong

    • Allegion's international specification business has historically been weak, and improvements are still in early stages, potentially limiting growth in this segment.
    • Electronics revenue declined high single digits compared to Q3 last year, indicating challenges in a key growth driver for Allegion.
    • The company expects the multifamily market to be soft for a while, suggesting ongoing weakness in this commercial vertical.

    Q&A Summary

    1. Market Outlook for 2025
      Q: What's the outlook for residential and nonresidential markets next year?
      A: We see overall stable markets with signs of Americas residential improving. Institutional verticals will continue to lead nonresidential growth, supported by strong municipal bond issuance, especially in the K-12 education sector where we're strong. Multifamily remains soft, but data centers are exceptionally strong, and we participate well there. We still expect organic growth in this stable environment.

    2. Pricing Strategy Amidst Inflation
      Q: How are you approaching pricing in the current inflationary environment?
      A: We're still in an inflationary environment and will drive pricing to cover inflationary pressures. We'll announce any pricing changes to the channel before an earnings call, but you can expect us to manage profitability by ensuring pricing covers inflation.

    3. Electronics Growth Expectations
      Q: What's the medium-term growth outlook for electronics globally?
      A: Despite challenging comps in 2023, we anticipate a more normal comp environment in 2025. Electronics adoption is still growing, and the replacement cycle is just starting. We view electronics as a high single to low double-digit growth driver over the cycle.

    4. M&A Activity and Pipeline
      Q: How does the acquisition of SOSS impact your business, and what's your M&A outlook?
      A: We're excited about the SOSS acquisition, which complements an existing business unit and primarily serves the nonresidential markets in the Americas. Overall, we're excited about our M&A pipeline; the environment is better than in '22 and '23. We'll continue to deploy cash in the best interest of shareholders, pursuing accretive acquisitions and share repurchases when appropriate.

    5. Productivity Improvements and Margins
      Q: Where are you in your productivity journey versus pre-COVID levels?
      A: We're really pleased with our productivity. After supply chain challenges in '21 and early '22 that caused inefficiencies, we've become much more efficient in '23 and '24, driving productivity. We've achieved margin expansion this year and will continue to drive price and productivity to cover inflation and fund investments.

    6. Share Gains and Competition
      Q: Are you seeing any share gains in institutional verticals?
      A: We don't disclose specific details, but any share gain likely came at the expense of short-line suppliers during our supply chain issues. Overall, we feel good about the institutional verticals and see them leading the way in the near term.

    7. International Spec Activity
      Q: How is international spec activity trending?
      A: Historically, spec activity hasn't been our strength, but we're investing in capability. The acquisition of Boss Door Controls earlier this year enhances our spec-driven business in the U.K.. We're building out human capital, and while it's early days, it's becoming an important part of our international business.

    8. Demand Related to ESSER Funding
      Q: Has the sunsetting of ESSER funding impacted demand?
      A: ESSER funding wasn't much of a tailwind for us, and we don't see much change due to its sunsetting. Safety and security remain priorities for schools, and our new products have hit a sweet spot in the market, adding value to faculty and teachers.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Allegion Americas740.9727.2740.9704.62,913.6709.3770.7782.4
    - Products167.1179.2167.1--178.9188.0175.6
    - Services9.96.19.9--5.76.99.1
    Allegion International182.1185.3177.0192.8737.2184.6194.9184.7
    Mechanical Products----2,436.3---
    Electronic Products----1,022.9---
    Services and Software50.143.647.450.5191.6---
    Americas--------
    EMEIA--------
    Asia Pacific--------
    Products--------
    Services--------
    Total Revenue923.0912.5917.9897.43,650.8893.9965.6967.1
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    U.S. Revenue----2,754.7---
    Non-U.S. Revenue----896.1---
    Allegion Americas--740.9--709.3770.7-
    Allegion International--177.0--184.6194.9-
    - EMEA--------
    - Asia Pacific--------
    Total Revenue923.0-917.9-3,650.8893.9965.6967.1

    Executive Team

    NamePositionStart DateShort Bio
    John H. StonePresident and Chief Executive OfficerJuly 2022John H. Stone has served as the President and Chief Executive Officer of Allegion plc since July 2022. Before joining Allegion, he was the President of Worldwide Construction, Forestry and Power Systems at Deere & Company from 2020 to 2022 .
    Michael J. WagnesSenior Vice President and Chief Financial OfficerMarch 2022Michael J. Wagnes has served as the Senior Vice President and Chief Financial Officer of Allegion plc since March 2022. Prior to this role, he was the Vice President and General Manager, Commercial Americas from 2020 to 2022 .
    Jeffrey N. BraunSenior Vice President and General Counsel2014Jeffrey N. Braun has served as the Senior Vice President and General Counsel at Allegion plc since 2014. He also held the position of Secretary from July 2022 to February 2023 and from 2018 to 2020 .
    Timothy P. EckersleyPresident, International and Senior Vice PresidentJune 2023Timothy P. Eckersley has served as the President, International and Senior Vice President, Allegion since June 2023. Prior to this role, he served as the Senior Vice President – Allegion International from 2021 to June 2023 .
    Jennifer L. HawesSenior Vice President – Chief Human Resources OfficerFebruary 2023Jennifer L. Hawes has served as the Senior Vice President – Chief Human Resources Officer at Allegion since February 2023. Prior to this role, she was the Vice President – Chief Human Resources Officer from 2022 to February 2023 .
    David S. IlardiSenior Vice President – Allegion AmericasMarch 2022David S. Ilardi has served as the Senior Vice President – Allegion Americas since March 2022. Prior to this role, he was the General Manager of Allegion Home from 2019 to 2022 .
    Tracy L. KempSenior Vice President – Chief Information and Digital OfficerDecember 2020Tracy L. Kemp has served as the Senior Vice President – Chief Information and Digital Officer at Allegion since December 2020. Prior to this role, she was the Senior Vice President – Chief Customer and Digital Officer from 2019 to 2020 .
    Robert C. MartensSenior Vice President – Chief Innovation and Design OfficerDecember 2019Robert C. Martens has served as the Senior Vice President – Chief Innovation and Design Officer at Allegion since December 2019. He also holds the position of Futurist and President of Allegion Ventures, a role he has been in since 2017 .
    Nickolas A. MusialVice President, Controller and Chief Accounting OfficerMarch 2022Nickolas A. Musial has served as the Vice President, Controller, and Chief Accounting Officer at Allegion plc since March 2022. Prior to this role, he was the Vice President of Finance for Allegion Americas from 2017 to 2022 .
    Vincent M. WenosSenior Vice President – Chief Technology OfficerJune 2019Vincent M. Wenos has served as the Senior Vice President – Chief Technology Officer at Allegion since June 2019. Prior to this role, he was the Vice President – Global Technology and Engineering from 2018 to 2019 .

    Questions to Ask Management

    1. Given the expected softness in the multifamily segment and potential weaknesses in the healthcare vertical within institutional markets, how confident are you in your non-residential growth projections for the next 12 months, and what specific strategies are you employing to mitigate these challenges?

    2. With customers potentially experiencing fatigue from continuous price increases in an inflationary environment, how sustainable is your pricing strategy to cover inflationary pressures without adversely affecting demand or market share?

    3. Historically, international specification has not been a strength for Allegion; can you elaborate on the progress you've made in building out this capability and how the acquisition of Boss Door Controls is enhancing your competitive position in international markets?

    4. Considering that ESSER funding did not significantly benefit your education vertical and municipal bond issuance might not remain as strong, how do you plan to sustain growth in the education sector amid these funding challenges?

    5. In light of past supply chain issues affecting your electronics business and the unusual comparables in 2023, what concrete measures are you taking to stabilize this segment, and how realistic is your expectation of achieving high single to low double-digit growth in electronics moving forward?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateJune 2023
    End Date/DurationNo expiration date
    Total additional amount$500.0 million
    Remaining authorization amount$340.0 million (as of 2024-09-30)
    DetailsThe program aims to return capital to shareholders, improve EPS, and manage capital structure flexibly.

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Total Reported Revenue Growth: 2.5% to 3.5% .
      2. Total Organic Revenue Growth: 1.5% to 2.5% .
      3. Adjusted Earnings Per Share (EPS): $7.35 to $7.45 .
      4. Available Cash Flow: $540 million to $570 million .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Revenue Growth:
        • Americas Segment: Total growth 2.5% to 3.5%, organic growth 2% to 3% .
        • International Segment: Total growth 3% to 4%, organic growth 0.5% to 1.5% .
        • Overall Company: Total growth 2.5% to 3.5%, organic growth 1.5% to 2.5% .
      2. Adjusted EPS: $7.15 to $7.30 .
      3. Available Cash Flow: $540 million to $570 million .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Total and Organic Revenue Growth in the Americas: 1.5% to 3.5% .
      2. Total Revenue Growth for Allegion International: 1.5% to 3.5%, organic growth -1% to 1% .
      3. Overall Company Revenue Growth: Total growth 1.5% to 3.5%, organic growth 1% to 3% .
      4. Adjusted EPS: $7.00 to $7.15 .
      5. Available Cash Flow: $540 million to $570 million .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Total and Organic Revenue Growth:
        • Americas: Total and organic growth 1.5% to 3.5% .
        • Allegion International: Total growth 1.5% to 3.5%, organic growth -1% to 1% .
        • Overall Company: Total growth 1.5% to 3.5%, organic growth 1% to 3% .
      2. Adjusted EPS: $7 to $7.15 .
      3. Available Cash Flow: $540 million to $570 million .
      4. Margin Expansion: Expected consistent with historical framework .
      5. Tax Rate: 18% to 19% .

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Assa Abloy AB - Mentioned as a principal global competitor in the security products markets .
    • dormakaba Group - Mentioned as a principal global competitor in the security products markets .
    • Fortune Brands Innovations, Inc. - Mentioned as a competitor in the North American residential market .

    Latest news

    Recent developments and announcements about ALLE.

    Corporate Leadership

      Board Change

      ·
      Dec 5, 2024, 9:40 PM

      Gregg C. Sengstack has been appointed to the Board of Directors of Allegion plc, effective December 4, 2024. He will serve on the Audit and Finance Committee, the Compensation and Human Capital Committee, and the Corporate Governance and Nominating Committee. Mr. Sengstack is recognized as an independent director under NYSE standards .