Allegion Q2 Earnings Top Estimates, Revenues Up Y/Y

Allegion plc's ALLE second-quarter 2024 adjusted earnings of $1.96 per share beat the Zacks Consensus Estimate of $1.77. The bottom line increased 11.4% year over year.

Revenue Details

Allegion's revenues were $965.6 million, which increased 5.8% year over year. Organic revenues increased 5.2% driven by price realization and volume growth. The company's revenues beat the Zacks Consensus Estimate of $944 million.

Acquired assets boosted revenues by 0.9%. Forex woes left a negative impact of 0.3% on revenues.

ALLE reports revenues under two segments. A brief discussion of quarterly results is provided below:

Revenues from Allegion Americas increased 6% year over year to $770.7 million. The figure accounted for 79.8% of the quarter's revenues. Our estimate for segmental revenues was $751.4 million.

Operating income for the segment was $214.3 million, up 9.7% year over year. Our estimate was $226.0 million.

Revenues from Allegion International were $194.9 million, up 5.2% year over year. The metric accounted for 20.2% of the quarter's revenues. Our estimate for segmental revenues was $192.9 million.

Segmental operating income was $17.7 million, up 27.3% year over year. Our estimate was $22.1 million.

Margin Profile

In the reported quarter, Allegion's cost of revenues increased 5.2% year over year to $537.3 million. Gross profit was $428.3 million, up 6.6% year over year, while the gross margin jumped 40 basis points (bps) to 44.4%.

Selling and administrative expenses inched up approximately 1% year over year to $219.3 million. Adjusted EBITDA was $236.5 million, reflecting a year-over-year increase of 10.5%. The margin grew 130 bps year over year to 30.7%.

Adjusted operating income increased 12.8% year over year to $228.6 million. The adjusted margin was 23.7%, up 150 bps. Interest expenses were $25.1 million, up 5.9% year over year. The effective tax rate was 17.8%, up from 12.6% in the year-ago quarter.

Balance Sheet and Cash Flow

While exiting the second quarter, Allegion had cash and cash equivalents of $747.5 million compared with $468.1 million at the end of fourth-quarter 2023. Long-term debt was $2 billion compared with $1.6 billion at the end of fourth-quarter 2023.

In the first six months of 2024, ALLE generated net cash of $224.1 million from operating activities, reflecting a decrease of 2.6% year over year. Capital expenditure was $48.1 million, up 20.3% year over year. The available cash flow was $176 million.

Allegion repurchased shares for $80 million. Dividends paid out totaled $83.8 million, reflecting an increase of 5.7% year over year.

2024 Outlook Raised

ALLE now expects revenues to increase 2.5-3.5% from the year-ago levels compared with 1.5-3.5% increase anticipated earlier. The company anticipates organic revenues to grow in the range of 1.5-2.5%.

Management projects earnings of $6.50-$6.65 per share on a reported basis compared with the prior expected range of $6.45-$6.60. Adjusted earnings are projected to be in the range of $7.15-$7.30 per share compared with the prior expected range of $7.00-$7.15. The consensus estimate for earnings is pegged at $7.09 per share.

The company estimates available cash flow to be in the range of $540-$570 million. The adjusted effective tax rate is estimated in the 18-19% band.

Zacks Rank

The company currently carries a Zacks Rank #2 (Buy).

Performance of Other Industrial Companies

Pentair plc PNR reported second-quarter adjusted earnings per share of $1.22, which beat the Zacks Consensus Estimate of $1.15. The reported figure also improved 18% from the year-ago quarter.

Net revenues rose 1.6% year over year to $1.1 billion. PNR's top line outpaced the Zacks Consensus Estimate of $1.09 billion. 

Crown Holdings, Inc. CCK reported second-quarter adjusted earnings per share of $1.81, which beat the Zacks Consensus Estimate of $1.59. The bottom line improved 8% year over year.

Net revenues totaled $3.04 billion, down 2.2% from the year-ago quarter. The top line missed the Zacks Consensus Estimate of $3.06 billion.

A. O. Smith Corporation's AOS second-quarter adjusted earnings of $1.06 per share missed the Zacks Consensus Estimate of $1.07. However, the bottom line increased 5% on a year-over-year basis.

Net revenues of $1.02 billion surpassed the consensus estimate of $992 million. The top line increased 7% year over year, driven by strong demand for residential and commercial water heaters in North America.

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