What's In Store For Allegion (ALLE) This Earnings Season?

Allegion plc (NYSE:ALLE) , a security solution provider for homes and businesses, is set to report third-quarter 2016 results on Oct 27, before the market opens.

Last quarter, the company posted a positive surprise of 11.24%. It also has an impressive earnings history, surpassing estimates in three of the last four quarters at an average of 11.58%.

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

Factors to Consider

Allegion reported impressive first-half 2016 results buoyed by higher earnings, margins and revenues from acquisitions and organic growth. The company is expected to maintain the performance in the third quarter as well. All the regions reported strong profits, barring Asia Pacific, driven by a stable market, investment in new products and channel strategies.

However, we are concerned about the economic slowdown in certain pockets of the world where Allegion has a considerable presence. The prevailing sluggishness in the Eurozone and continuing recession in China are likely to keep Allegion’s international profits under pressure in the to-be-reported quarter. Moreover, owing to the company’s substantial international presence, volatile currency translations could prove to be a significant headwind.

Earnings Whispers

Our proven model does not conclusively show that Allegion is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: Allegion’s earnings ESP is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 95 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Though the company’s Zacks Rank #2 increases the predictive power of ESP, we need to have a positive ESP to be confident of an earnings surprise.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some stocks in the broader industrial products sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Caterpillar Inc. (NYSE:CAT) , with an earnings ESP of +1.33% and a Zacks Rank #2.

Ball Corporation (NYSE:BLL) , with an earnings ESP of +5.44% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

ABB Ltd. (NYSE:ABB) , with an earnings ESP of +17.86% and a Zacks Rank #3.

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