Allegion (ALLE) To Report Q3 Earnings: What's In The Cards?

Allegion plc (NYSE:ALLE) is slated to report third-quarter 2019 results on Oct 24, before market open.

The company delivered average negative earnings surprise of 0.05% in the trailing four quarters, missing estimates once. Notably, Allegion’s second-quarter 2019 adjusted earnings of $1.26 per share lagged the Zacks Consensus Estimate of $1.31 by 3.82%.

In the past three months, the company’s shares have lost 2.8% against 1.3% growth recorded by the industry it belongs to.

Let’s see how things are shaping up prior to this announcement.

Key Factors

Escalating cost of sales remains a persistent concern for Allegion. In the first and second quarter of 2019, the company's cost of sales jumped 6.4% and 2.9%, respectively, year over year on account of material price inflation. We believe high costs are likely to have adversely impacted the company’s margin and profitability in the third quarter as well.

The company is making incremental investments for new product development, channel strategies and demand creation spending. In the second quarter, capital expenditures to support growth investments had an adverse impact of 4 cents on earnings. These actions are likely to have put pressure on the company's profitability in the to-be reported quarter as well.

Moreover, given the company’s diverse geographic presence, its operations are subject to economic, social and environmental risks. For instance, in the first and second quarter of 2019, currency translation had an adverse impact of 2.3% and 1.5%, respectively, on the company’s revenues. A stronger U.S. dollar might have hurt the company's overseas business in the third quarter.

However, healthy demand for the company’s electronic products, led by Simons Voss and Interflex businesses along with strength in non-residential business is likely to get reflected in the company’s top-line numbers.

The Zacks Consensus Estimate for revenues from the company's Americas segment is pegged at $558 million, an increase of 5.3% from the year-ago reported figure. The consensus mark for Asia Pacific segment’s revenues stands at $56 million, implying 19.1% increase. The consensus estimate for revenues from Europe, Middle East, India and Africa segment is currently pegged at $131 million, reflecting 2.2% decline.

Earnings Whispers

According to our quantitative model a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or at least 3 (Hold) to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

But that is not the case here as we will see below.

Earnings ESP: Allegion has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.33.

Zacks Rank: Allegion carries a Zacks Rank #4 (Sell).

Key Picks

Here are some companies you may want to consider as our model shows that these have the right mix of elements to beat estimates this earnings season:

Cintas Corporation (NASDAQ:CTAS) has an Earnings ESP of +0.16% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Welbilt, Inc. (NYSE:WBT) has an Earnings ESP of +1.01% and a Zacks Rank of 3.

Sealed Air Corporation (NYSE:SEE) has an Earnings ESP of +2.40% and a Zacks Rank #3.

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