EUR 850.00 For Business Accounts Only

Morningstar | Allegion's On Track to Achieve Its 2019 Financial Goals; Electronics Remain Key Growth Driver

Allegion, a global leader in security products and solutions, was spun off from narrow-moat Ingersoll-Rand in December 2013. No longer forced to compete for capital from a conglomerate parent, Allegion can now employ a robust acquisition strategy to expand its scale, technological capabilities, and product portfolio. At 73% of sales and 91% of segment profitability, Allegion’s Americas segment is the firm’s largest and strongest business, with a leading position in locks, exit devices, and door controls. The Americas business has been the key driver of Allegion’s stable and industry-leading profitability, which is a testament to the firm’s market position and pricing power. We expect the Americas business to post mid- single-digit growth over the next few years as the segment capitalizes on increased retrofit and upgrade spending across commercial and residential end markets that is fueled by the convergence of electronics and mechanical security solutions, improving U.S. residential construction, and strategic acquisitions. The segment’s already strong operating margins should benefit from a mix-shift to higher-tech products and operating leverage on increased volumes.We believe that the company’s Asia-Pacific and Europe, Middle East, India, and Africa segments are subscale, which may explain both segments' less robust margin performance relative to Allegion’s strong Americas segment; however, the company is working diligently to keep strengthening these businesses through restructurings, channel development, and strategic acquisitions that build scale and expand the company product portfolio. We expect EMEIA and Asia-Pacific segment profitability to improve as these initiatives take hold. Like the Americas segment, these segments should also benefit from the convergence of electronic and mechanical security technology.