Allegion PLC

S&P Global Ratings' stable outlook on Allegion PLC reflects our expectation that the company, absent a sizable acquisition, will maintain adjusted debt-to-EBITDA leverage near 2x over the next two years. This would allow for modest acquisition activity and accounts for stable margins of about 25%. We anticipate this being driven by healthy repair and replacement spending and steady new home, commercial, and institutional construction. Even in the event of a sizable acquisition, we expect Allegion's debt leverage would not exceed 3x on a sustained basis. In the unlikely event that leverage did rise above 3x, we anticipate the company would use its strong free cash flow to rapidly deleverage to well below 3x within a year. Based on our outlook

...Allegion is likely to continue strong free cash flow generation. As the company's end markets continue to shift toward electronic from mechanical locks and access points, we expect Allegion's product mix to shift to higher value products, expanding EBITDA and generating higher operating cash flows. With very manageable capital spending requirements, we expect this in turn to lead to more robust free cash flow generation. Allegion has strong credit metrics that we expect to remain unchanged. Allegion's leverage over the past nine quarters has remained in the 1.9x to 2.4x range, ending at 2.1x as of March 31, 2019. We expect the company to maintain leverage near 2x in 2019 and 2020 as EBITDA generation expands and the company continues to deploy cash for acquisitions, dividends, and share repurchases. We believe that Allegion will maintain leading market share and strong brand name recognition in the U.S. Given the nature of its products, the quality of security devices such as locks is of...

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