Allegion (ALLE) To Buy Qatar Metal, Expand In Middle East

In order to accelerate growth in the fast growing EMEIA (Europe, Middle East, India and Africa) region, Allegion plc (NYSE:ALLE) will be acquiring one of Middle East’s largest manufacturers of commercial steel and wood doors and frames, Qatar Metal Industries. The transaction is expected to close in the first quarter of 2018.

Buyout Benefits

Qatar Metal, whose products are closely associated with Allegion’s core business and specification capabilities, will operate in Allegion’s EMEIA region. The company’s products will be offered as part of Allegion’s full-door solution for end users, specifiers and customers in the Middle East. Notably, Qatar Metal generated approximately $24 million in net sales for the 12 months ended Sep 30, 2017.

With the addition of Qatar Metal, Allegion will be able to expand its code-compliant products to include doors in the Middle Eastern market.

Inorganic Drive Strong

Acquisitions are an important part of Allegion’s growth strategy. 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 numerous opportunities to broaden the product portfolio as well as geographic footprint and enhance the position in strategic market segments through buyouts. During the first nine months of 2017, acquisitions accounted for 1.6% of the 7% revenue growth.

In January 2017, Allegion acquired McKenzie-based Republic Doors & Frames, Inc. through one of its subsidiaries. This buyout is expected to expand Allegion’s product line, improve operating efficiency and expand its distribution footprint. In June 2016, Allegion acquired Germany-based safety and security provider, Trelock GmbH and related companies. The company is focused on growing its portfolio through acquisitions in the near term.

Stock Price Movement

Allegion’s shares have gained 29.8% year to date, outperforming the 0.7% growth of its industry. Estimates for 2017 earnings decreased 0.5% over the last 60 days, while that for 2018 increased 0.5%. Allegion's acquisitions and focus on innovation should drive the stock’s performance.

Zacks Rank & Stocks to Consider

Allegion carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same sector are Acco Brands Corporation (NYSE:ACCO) , Ituran Location and Control Ltd. (NASDAQ:ITRN) and Altra Industrial Motion Corp. (NASDAQ:AIMC) . All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Full-year 2017 earnings for Acco Brands will likely increase 31.8%.

Ituran Location’s earnings are expected to rise 40.5% in 2017.

Altra Industrial’s 2017 earnings are likely to grow 31.6%.

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