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Allegion (ALLE) Hit by Surging Costs & Broader Market Risks
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On Jan 14, we issued an updated research report on Allegion plc (ALLE - Free Report) .We believe that material price inflation might continue to escalate costs and thereby hurt the company’s near-term profitability.
It’s not surprising that the stock has also put up a dismal show in the recent times. Notably, in the past month, Allegion’s shares have lost 1.9% against the industry’s growth of 3.3%.
Read on to find the major factors affecting this Zacks Rank #4 (Sell) company’s prospects and why it may be prudent to avoid the stock at the moment.
Factors at Play
Escalating costs of sales has been a major cause of concern for Allegion over the past few quarters. Notably, in third-quarter 2018, the company’s cost of sales flared up 20% year over year. Material cost inflation is escalating the company’s aggregate costs of late. Rising cost, if unchecked will continue to dent the company’s margins in the quarters ahead.
The company intends to expand its business in new overseas markets. However, this exposes it to economic, social and environmental risks. Moreover, Allegion’s businesses are subject to seasonality, depending on the product line.
For instance, its security product sales are typically higher in second and third quarters every year in the Northern Hemisphere as favorable weather is conducive to construction and do-it-yourself projects. However, any uncertainties or adversities during these quarters can be a huge drag on the company's sales.
Moreover, on an Enterprise Value/EBITDA (TTM) basis, Allegion’s shares look overvalued compared to its industry with respective tallies of 13.0x and 9.2x for the past month. This makes us cautious toward the stock.
Stocks to Consider
Some better-ranked stocks in the same industry are Axon Enterprise, Inc. , Brady Corp. (BRC - Free Report) and Alarm.com Holdings, Inc. (ALRM - Free Report) . While Axon Enterprise sports a Zacks Rank #1 (Strong Buy), Brady and Alarm.com Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Axon Enterprise exceeded estimates in each of the preceding four quarters, the average positive earnings surprise being 391.67%.
Brady surpassed estimates thrice in the trailing four quarters, the average positive earnings surprise being 7.04%.
Alarm.com Holdings outpaced estimates in each of the preceding four quarters, the average earnings surprise being 27.26%.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6% and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Allegion (ALLE) Hit by Surging Costs & Broader Market Risks
On Jan 14, we issued an updated research report on Allegion plc (ALLE - Free Report) . We believe that material price inflation might continue to escalate costs and thereby hurt the company’s near-term profitability.
It’s not surprising that the stock has also put up a dismal show in the recent times. Notably, in the past month, Allegion’s shares have lost 1.9% against the industry’s growth of 3.3%.
Read on to find the major factors affecting this Zacks Rank #4 (Sell) company’s prospects and why it may be prudent to avoid the stock at the moment.
Factors at Play
Escalating costs of sales has been a major cause of concern for Allegion over the past few quarters. Notably, in third-quarter 2018, the company’s cost of sales flared up 20% year over year. Material cost inflation is escalating the company’s aggregate costs of late. Rising cost, if unchecked will continue to dent the company’s margins in the quarters ahead.
The company intends to expand its business in new overseas markets. However, this exposes it to economic, social and environmental risks. Moreover, Allegion’s businesses are subject to seasonality, depending on the product line.
For instance, its security product sales are typically higher in second and third quarters every year in the Northern Hemisphere as favorable weather is conducive to construction and do-it-yourself projects. However, any uncertainties or adversities during these quarters can be a huge drag on the company's sales.
Moreover, on an Enterprise Value/EBITDA (TTM) basis, Allegion’s shares look overvalued compared to its industry with respective tallies of 13.0x and 9.2x for the past month. This makes us cautious toward the stock.
Stocks to Consider
Some better-ranked stocks in the same industry are Axon Enterprise, Inc. , Brady Corp. (BRC - Free Report) and Alarm.com Holdings, Inc. (ALRM - Free Report) . While Axon Enterprise sports a Zacks Rank #1 (Strong Buy), Brady and Alarm.com Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Axon Enterprise exceeded estimates in each of the preceding four quarters, the average positive earnings surprise being 391.67%.
Brady surpassed estimates thrice in the trailing four quarters, the average positive earnings surprise being 7.04%.
Alarm.com Holdings outpaced estimates in each of the preceding four quarters, the average earnings surprise being 27.26%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6% and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>