Allegion (NYSE:$ALLE), a leading provider of security products for homes and businesses released its Q4 fiscal 2024 results to a negative market reaction. The company reported an earnings and revenue beat in the fourth quarter, but that was not enough to sway investors. Here is a deep dive into why Allegion stock dipped after Q4 fiscal 2024 results.
Allegion Q4 Results
For the fourth quarter of fiscal 2024, Allegion reported revenue of Revenues of $945.6 million, a 5.4% YoY increase, and above the consensus estimate of $938.17 million. Adjusted earnings per share came in at $1.86, up 10.7% YoY on net earnings of $161.8 million, and above estimates of $1.75.
Its adjusted operating margin came in at 22.1%, a 10 basis-point increase compared to the 22.0% reported the previous year. The adjusted operating income came in at $209.1 million, a 6% YoY increase. At the end of Q4, Allegion had $503.8 million in cash, and cash equivalents.
Full Year Results
In fiscal 2024, Allegion reported revenue of $3.8 billion, a 3.3% YoY increase. The adjusted EPS was up 8.2% YoY to $7.53 on adjusted net earnings of $659.7 million.
Meanwhile, the adjusted operating margin was up 70 basis points to 22.8% on an adjusted operating income of $860.8 million, a 6.9% YoY increase. It ended fiscal 2024 with $582.9 million in available cash flow, a 12.9% YoY increase, and a total debt of $1,999.5 million.
Segment Performance
The American segment saw revenue rise 6.4% YoY, with organic revenue growth of 4.6% YoY, driven by price realization, and volume growth. Non-residential business rose by mid-single digits, and while the residential business was up by high-single digits. The region’s adjusted operating margin rose 70 basis points to 27.4%.
Allegion’s international segment saw a 1.5% increase in revenue, and 0.7% decline organically. Organic revenue decline was driven by volume decline, partially offset by price realization. The segment had an adjusted operating margin of 15.8%, a 100-basis point decline due to lower volumes.
Fiscal 2025 Guidance
For the full year, Allegion expects an adjusted EPS of $7.65 to $7.85, which is in line with estimates of $7.75. It expects revenue to rise 1% to 3% in fiscal 2025 and 1.5% to 3.5% on an organic basis. The company expects available cash flow of 85% to 90% of adjusted net income. Its full-year revenue guidance signals a slowdown in growth from fiscal 2024.
Shareholder Returns
In Q4, Allegion bought back $100 million worth of shares and paid dividends of $41.4 million. Throughout fiscal 2024, the company bought back $200 million worth of shares and paid dividends of $167 million.
Allegion Market Performance
Following the disappointing full-year guidance, Allegion stock declined 2.98% during the early morning trading session to $129.41 as of 10:39 AM EST. Year to date, the stock is down 0.04%, while in the past 6 months, it is down 0.49%, and down 1.35% in the past 12 months. Overall, ALLE has undrperformed the market.
Is Allegion (ALLE) A Buy In 2025?
Allegion’s recent results signal a company that is set to experience a slow down in growth in fiscal 2025. However, management has engaged in an aggressive restructuring program that could pay off with long term growth.
While most of the company’s sales come from mechanical products, there is a huge opportunity in the software solution and electronics. During the earnings call, Mike Wagnes, Senior VP and CFO of Allegion, told analysts to “expect to see electronics growth outpace the mechanical like we’ve shown in the past. So you could see electronics growth certainly be better than the overall Americas growth.”
Growth in software and electronics solutions for the non-residential clients, coupled with acquisitions, could potentially propel ALLE stock higher in the long term. Consequently, adding ALLE to your portfolio as part of a long-term investment strategy could potentially pay off.
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