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 .
- Mechanical Products - Offers a variety of security solutions including locks, locksets, portable locks, key systems, door controls, and exit devices for various markets.
- 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.
- Services and Software - Includes inspection, maintenance, repair, and SaaS offerings to support and enhance security product functionality.
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Q3 2024 Summary
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
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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. -
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. -
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. -
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. -
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. -
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. -
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. -
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
Revenue by Segment - in Millions of USD | FY 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Allegion Americas | 740.9 | 727.2 | 740.9 | 704.6 | 2,913.6 | 709.3 | 770.7 | 782.4 | ||||||||||||||||||||||||||||||||||||||||||||||
- Products | 167.1 | 179.2 | 167.1 | - | - | 178.9 | 188.0 | 175.6 | ||||||||||||||||||||||||||||||||||||||||||||||
- Services | 9.9 | 6.1 | 9.9 | - | - | 5.7 | 6.9 | 9.1 | ||||||||||||||||||||||||||||||||||||||||||||||
Allegion International | 182.1 | 185.3 | 177.0 | 192.8 | 737.2 | 184.6 | 194.9 | 184.7 | ||||||||||||||||||||||||||||||||||||||||||||||
Mechanical Products | - | - | - | - | 2,436.3 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Electronic Products | - | - | - | - | 1,022.9 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Services and Software | 50.1 | 43.6 | 47.4 | 50.5 | 191.6 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Americas | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
EMEIA | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Asia Pacific | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Products | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Services | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | 923.0 | 912.5 | 917.9 | 897.4 | 3,650.8 | 893.9 | 965.6 | 967.1 | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue by Geography - in Millions of USD | FY 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
U.S. Revenue | - | - | - | - | 2,754.7 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Non-U.S. Revenue | - | - | - | - | 896.1 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Allegion Americas | - | - | 740.9 | - | - | 709.3 | 770.7 | - | ||||||||||||||||||||||||||||||||||||||||||||||
Allegion International | - | - | 177.0 | - | - | 184.6 | 194.9 | - | ||||||||||||||||||||||||||||||||||||||||||||||
- EMEA | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- Asia Pacific | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | 923.0 | - | 917.9 | - | 3,650.8 | 893.9 | 965.6 | 967.1 |
Executive Team
Questions to Ask Management
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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?
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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?
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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?
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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?
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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?
Past Guidance
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: FY 2024
- Guidance:
- Total Reported Revenue Growth: 2.5% to 3.5% .
- Total Organic Revenue Growth: 1.5% to 2.5% .
- Adjusted Earnings Per Share (EPS): $7.35 to $7.45 .
- Available Cash Flow: $540 million to $570 million .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: FY 2024
- Guidance:
- 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% .
- Adjusted EPS: $7.15 to $7.30 .
- Available Cash Flow: $540 million to $570 million .
- Revenue Growth:
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: FY 2024
- Guidance:
- Total and Organic Revenue Growth in the Americas: 1.5% to 3.5% .
- Total Revenue Growth for Allegion International: 1.5% to 3.5%, organic growth -1% to 1% .
- Overall Company Revenue Growth: Total growth 1.5% to 3.5%, organic growth 1% to 3% .
- Adjusted EPS: $7.00 to $7.15 .
- Available Cash Flow: $540 million to $570 million .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- 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% .
- Adjusted EPS: $7 to $7.15 .
- Available Cash Flow: $540 million to $570 million .
- Margin Expansion: Expected consistent with historical framework .
- Tax Rate: 18% to 19% .
- Total and Organic Revenue Growth:
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
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 .