Locks and access door company Allegion (NYSE: ALLE) stock had risen by 10.3% at 11 a.m. ET. The move comes after its first-quarter earnings report was released this morning. Here’s what happened and why the stock looks like a great value.
It’s no secret that the residential housing market is under pressure from relatively high interest rates. The tariff turmoil threatens nearly all manufacturers, and they may be unable to pass on increased supply chain costs. There’s also the threat of an order slowdown in response to uncertainty around tariffs.
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However, Allegion merely maintaining its full-year guidance for mid-single-digit revenue growth and adjusted earnings per share (EPS) of $7.65-$7.85 was enough to trigger a rally. The good news is that it can continue because Allegion’s underlying fundamentals remain strong.
While residential sales in the Americas region remain weak (declining by a mid-single-digit rate), they were more than offset by a high-single-digit increase in nonresidential sales. Allegion is a play on the convergence of electronics (notably web-enabled) and mechanics in lock security.
Web-enabled electronic locks allow facility owners to control and monitor access areas more effectively and create valuable information about who is where in a facility. Those benefits continue to shine through, and Allegion’s electronics sales rose by a low double-digit rate in the quarter.
“Price realization” (due to higher prices) of 1.1% combined with volume growth of 3.8% led to a 4.9% increase in organic sales. The good news on pricing gave investors confidence that Allegion could overcome management’s estimate of $80 million in increased tariff-related costs in 2025.
Trading at less than 18 times the midpoint of management’s 2025 EPS guidance, Allegion remains an excellent stock for investors who believe in the long-term potential for electronic locks and access doors.
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