Allegion (ALLE) Extends Core Product Lines With TGP Buyout

Allegion plc (NYSE:ALLE) acquired leading North American manufacturer of advanced fire-rated entrance and wall systems, Technical Glass Products or TGP. The acquisition was made by one of Allegion’s subsidiaries and TGP is expected to operate within its Americas segment. However, financial terms of the transaction were not disclosed.

Buyout Benefits

TGP, which generated approximately $80 million in net sales in the trailing 12 months ended Sep 30, 2017, is expected to drive Allegion’s earnings in 2018. The addition of TGP’s products along with its focus on institutional and non-residential projects will enhance Allegion’s core business.

TGP is also expected to strengthen Allegion’s existing specification writing capabilities. Moreover, Allegion’s complementary solutions will expand its reach in North American and Middle Eastern markets.

Meanwhile, TGP’s customers and distributors will gain access to Allegion’s specialty products, hollow metal doors along with frames and premium product offerings.

The Larger Picture

The acquisition is in line with Allegion’s plan to expand and grow through buyouts. The security products industry is highly fragmented, particularly in the developing markets, and involves the use of emerging technology products that employ newer technologies. This creates opportunities to broaden the product portfolio as well as geographic footprint. During the first nine months of 2017, acquisitions contributed 1.6% to revenue growth of 7%.

The company has made a number of acquisitions over the years. In January 2017, Allegion had acquired McKenzie-based Republic Doors & Frames, Inc. through one of its subsidiaries. The buyout is expected to expand Allegion’s product line, improve operating efficiency and expand distribution footprint. In June 2016, Allegion had taken over Germany-based safety and security provider, Trelock GmbH and related companies.

The company will continue to focus on growing its portfolio through acquisitions in the near term.

Stock Price Movement

Allegion’s shares have gained 23.5% in the past year, compared to 1.2% growth of its industry. However, earnings estimates for 2017 and 2018 remained stable over the past 60 days, limiting upside potential of the stock.

Zacks Rank & Stocks to Consider

Allegion carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same space are Net 1 UEPS Technologies, Inc. (NASDAQ:UEPS) , Lakeland Industries Inc. (NASDAQ:LAKE) and Ituran Location and Control Ltd. (NASDAQ:ITRN) . Net 1 UEPS Technologies carries a Zacks Rank #1 (Strong Buy), while the other two companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Net 1 UEPS Technologies surpassed earnings in three of the past four quarters, with average beat of 5.3%.

Lakeland’s earnings are expected to rise 66.9% in fiscal 2018.

Ituran Location’s 2018 earnings are likely to increase 14.4%.

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