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Allegion (ALLE) to Report Q3 Earnings: What's in the Cards?

Allegion plc ALLE is slated to report third-quarter 2018 results on Oct 25, before the market opens.

The company pulled off an average positive earnings surprise of 4.38% over the preceding four quarters. Notably, Allegion’s second-quarter 2018 adjusted earnings of $1.25 per share outpaced the Zacks Consensus Estimate of $1.20 by 4.2%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Allegion expects that global electronics growth and strategic business acquisitions will continue to bolster its revenues in the quarters ahead. Moreover, favorable foreign currency movements will likely support the upside.

The company believes strength in non-residential and residential businesses, favorable pricing, and TGP and AD Systems acquisitions will drive revenues of its Americas business arm in the quarter under review. Moreover, the recent buyout of ISONAS (July 2018) will likely strengthen the company’s safety and security business, and be conducive to the segment’s top-line figure. However, prevailing price reductions in the highly competitive residential retail business (especially the mechanical market) might dent the segment’s revenue performance. Also, the existing supply-chain constraints may delay construction projects and weigh over the top line numbers of the segment. The Zacks Consensus Estimate for third-quarter 2018 revenues of Allegion’s Americas segment is currently pegged at $512 million, lower than $527 million recorded in the last reported quarter.

Allegion expects that benefits of the QMI acquisition and favorable macroeconomic conditions will drive revenues of its Europe, Middle East, India and Africa (EMEIA) segment, in the near term. However, the Zacks Consensus Estimate for third-quarter 2018 revenues of the segment is currently pinned at $140 million, slightly lower than $148 million recorded in the previous quarter.

GWA's latest Door & Access business acquisition (July 2018) is expected to fortify Allegion’s Australian business, in turning boosting the near-term top-line performance of the Asia-Pacific business segment. Notably, the Zacks Consensus Estimate for third-quarter 2018 revenues of the segment is currently pegged at $47.4 million, higher than $30.1 million reported in the prior quarter.

Allegion believes stellar revenues, strategic acquisitions, operational excellence, ongoing pricing moves and diligent cost-cutting initiatives will continue to enhance its profitability in the quarters ahead. Nevertheless, inflationary headwinds prevailing across all end-markets remain a key cause of concern. Furthermore, incremental investments made to expand business in the residential electronics market and develop new products might drag down near-term margins of the company in the quarters ahead. Integration costs associated with the recently-made acquisitions might also continue to dampen the company’s profitability, moving ahead.

The Zacks Consensus Estimates for third-quarter 2018 operating income of Allegion’s Americas, EMEIA and Asia Pacific business segments are currently pegged at $151 million, $13.9 million and $3.8 million, as against the corresponding tallies of $156 million, $12.1 million and $2.7 million witnessed in the last quarter.

Earnings Whispers

Our proven model provides some idea on the stocks that are about to release their earnings results. Per the model, a stock needs to have a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or 2 (Buy) or at least 3 (Hold) for a likely earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

That is not the case here as we will see below.

Earnings ESP: Allegion has an Earnings ESP of -0.33%. The Zacks Consensus Estimate for the company’s third-quarter 2018 earnings is currently pegged at $1.21 per share.

Allegion PLC Price and EPS Surprise


Allegion PLC Price and EPS Surprise | Allegion PLC Quote


Zacks Rank: Allegion’s favorable Zacks Rank of 3, when combined with a negative Earnings ESP, makes surprise predictions inconclusive.

It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some stocks in the Zacks Industrial Products sector that you may want to consider, as our model shows that these picks have the right combination of elements to post an earnings beat:

AptarGroup, Inc. ATR has a Zacks Rank #2 and an Earnings ESP of +0.77%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kennametal Inc. KMT has a Zacks Rank of 2 and an Earnings ESP of +0.22%.

Flowserve Corporation FLS has a Zacks Rank #2 and an Earnings ESP of +1.72%.

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