Allegion Shares Hit Record High After Q1 Earnings Beat; Target Price $150
Allegion shares surged to record levels on Thursday after the leading global security products and solutions company reported better-than-expected earnings and revenue in the first quarter of this year and raised their outlook for full-year 2021.
The company reported first-quarter 2021 net revenues of $694.3 million and net earnings of $108 million, or $1.18 per share. Adjusted net earnings were $109.6 million, or $1.20 per share, up 15.4% when compared with first-quarter 2020 adjusted EPS of $1.04. That was also higher than Wall Street’s consensus estimates of EPS $1.02 per share and net revenue of 674.7 million.
Allegion upgraded its full-year 2021 revenue outlook and now expects reported revenue to increase 3 to 4% and organic revenue to be up 2 to 3%. The company forecast EPS to a range of $4.85 to $5.05 and adjusted EPS between $5.00 to $5.15.
Following upbeat results, Allegion shares jumped as much as 5% to a new high of $139.61, closing 1.8% higher at $135.49 on Thursday.
“We see improving risk/reward for ALLE even after a healthy reaction to the 1Q21 beat and raise. 2Q appears tricky based on easy comps and the absence of industry backlog, but we see valuation as being near LT averages at the bottom of a non-resi cycle, which supports a more constructive view,” noted Joshua Pokrzywinski, equity analyst at Morgan Stanley.
“Net/net, our price target comes up to $149 (from $138 prior) as we raise our estimates and roll forward our model. We remain Equal-weight, though we see improving risk-reward. Our 2Q21e EPS comes up to $1.16 vs. $1.14 prior, and our full-year 2021e EPS increases to $5.25 from $4.93 prior, and sits ~$0.10 above the high end of the $5.00 to $5.15 guidance range. Our 2022/2023e EPS also increases to $5.60/$6.10 from $5.36/$5.80 prior.”
Allegion Stock Price Forecast
Six analysts who offered stock ratings for Allegion in the last three months forecast the average price in 12 months of $132.40 with a high forecast of $150.00 and a low forecast of $115.00.
The average price target represents a -2.28% decrease from the last price of $135.49. Of those six analysts, two rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.
Morgan Stanley gave the base target price of $149 with a high of $173 under a bull scenario and $124 under the worst-case scenario. The firm gave an “Equal-weight” rating on the security products company’s stock.
Several other analysts have also updated their stock outlook. Barclays raised the stock price forecast to $165 from $150. Credit Suisse lifted the price target to $142 from $131. CFRA upped the target price to $147. Zacks Investment Research cut Allegion from a “buy” rating to a “hold” rating and set a $114 price target.
“We believe the Biden administration’s infrastructure spending plan would be a long-term growth opportunity for Allegion, especially in its sweet spot of schools and institutional infrastructure. But since Allegion is a long-cycle business, we wouldn’t expect this growth to begin until 2023,” noted Brian Bernard, sector director at Morningstar.
“We expect to increase our fair value estimate about 8%, primarily due to our stronger growth outlook and lower reinvestment assumptions. A review of Allegion’s historical average reinvestment rate suggested that our long-term assumption (20%) is a bit high, and we expect to lower it to 17%, which accounts for 2% of our fair value increase.”
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