Market Anticipates Big Things for Allegion's Q2 Report

Allegion stock’s fundamentals suggest a lack of financial security

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Allegion plc (NYSE:ALLE) is an American-Irish security company with products for homes and businesses being sold in more than 130 countries across the world. ALLE’s portfolio has more than 30 global brands, including CISA, Interflex, LCN, Schlage, SimonsVoss, and Von Duprin. Allegion specializes in security solutions related to residential and commercial locks, door closer and exit devices, steel doors and frames to access control, and workforce productivity systems. 

ALLE is scheduled to release its second quarter of 2021 financial results on Thursday, July 22, ahead of the opening bell. In recent history, Allegion has exceeded earnings expectations on all four of its most recent earnings reports. Analysts are expecting another tick up in earnings per share for Allegion when reporting tomorrow.

For Q2 of 2020, ALLE beat analysts’ estimates by a margin of $0.08 and reported an EPS of $0.92. For Q3 of 2020, Allegion's EPS increased to $1.67 and beat expectations by a margin of $0.45. For the final quarter of 2020, ALLE posted a decrease in earnings, dropping to $1.49 per share. However, the security company still beat estimates by a margin of $0.30. For Q1 of 2021, Allegion reported an EPS of $1.20 and beat expectations by a margin of $0.18.

Allegion stock has increased by about 28% year-over-year and is up by 10% since bottoming at a 52-week low of $94.01 last September. Additionally, shares of ALLE have grown by 20% year-to-date and are currently down less than 3% from its May 10 record high of $144.76. Allegion stock also has a forward dividend of $1.44 and a dividend yield of 1.06%.

From a fundamental point of view, Allegion stock doesn’t provide a high enough level of consistency or growth to warrant the stock's current valuation. Allegion stock trades at a price-earnings ratio of 30.92 and has a forward price-earnings ratio of 27.10.

Allegion declined in net income between fiscal 2019 and fiscal 2020 and carries $1.52 billion in debt and $394.3 million in cash on its balance sheet. Overall, the company’s fundamentals suggest Allegion stock is overvalued ahead of Q2 earnings.

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