Allegion Exhibits Strong Prospects Despite Persisting Headwinds

Allegion plc ALLE is benefiting from strong momentum across its segments. Stable demand across end markets like education, healthcare, government, hospitality and retail and the acquisitions of Next Door Company and Trimco are driving the Allegion Americas segment. The increase in demand for non-residential products also bodes well. An increase in demand for electronic security products, driven by growing awareness about the security and safety of people and infrastructure, is aiding the Allegion International segment. Positive price realization and the acquisition of Lemaar Pty also bode well for the segment.

Allegion solidified its product portfolio and leveraged business opportunities through asset additions. In April 2025, the company acquired Trimco Hardware (Trimco), along with its brands and various assets, through one of its subsidiaries. The inclusion of Trimco’s expertise in specialty solutions, coupled with its strong innovation capabilities, will enable Allegion to boost its door and frame portfolio within the Allegion Americas segment. ALLE acquired Lemaar Pty Ltd (Lemaar) in March 2025. This acquisition boosted Allegion’s security and accessibility portfolio in Australia. The acquired company is incorporated into the Allegion International segment.

In February 2025, the company acquired Next Door Company, which expanded its doors and frames portfolio. Next Door is reported in its Allegion Americas segment. In June 2024, the company acquired Krieger Specialty Products. The addition of Krieger’s expertise in specialty solutions will enable Allegion to strengthen its door and frame portfolio. Also, in the same month, it purchased Unicel Architectural Corp. The inclusion of Unicel’s proficiency in glass and building envelope solutions will enable it to boost its product portfolio within the non-residential business. Both the acquired businesses have been incorporated into the Allegion Americas segment.

Allegion’s commitment to rewarding shareholders through dividends and share buybacks is encouraging. The company paid dividends worth $43.6 million in the first quarter of 2025, reflecting an increase of 3.6% year over year. In the same period, Allegion repurchased shares for $40 million. At the time of exiting the first quarter of 2025, the company was left to repurchase shares worth $200 million under its 2023-approved program. In February 2025, Allegion announced a 6% hike in its quarterly dividend rate, which is now 51 cents per share.

In the year-to-date period, this Zacks Rank #3 (Hold) company’s shares have gained 9.3% compared with the industry’s 5.6% growth.

Headwinds Plaguing ALLE

Allegion is dealing with escalating costs and expenses. During the first quarter of 2025, the company witnessed a 3.4% year-over-year increase in the cost of sales due to high raw material costs. Also, selling and administrative expenses inched up 3.1% year over year. This can be attributed to higher investments in new products and channel development, and growth initiatives. High costs pose a threat to Allegion’s bottom line. Escalating costs and expenses, if left unchecked, may negatively impact profitability in the quarters ahead.

Allegion intends to expand its business in new overseas markets. Its international presence exposes it to the risk of adverse currency fluctuations. This is because a strengthening U.S. dollar may require the company to either raise prices or see its margins shrink in locations outside the United States. In the first quarter, forex woes left an adverse impact of 0.8%.

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This article originally published on Zacks Investment Research (zacks.com).

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