Allegion PLC

Overview Key strengths Key risks One of the largest manufacturers of mechanical and electronic security products, including door locks and access controls systems, with leading brands such as LCN, Schlage, and Von Duprin. Intense competition from large and well-capitalized global competitors Assa Abloy AB, Stanley Black&Decker Inc., and DormaKaba Group. Efficient global manufacturing footprint with multiple production and assembly facilities, strengthening freight cost control. Narrow security product focus, primarily concentrated in door locks, frames, closers, and related products. Adjusted EBITDA margins (about 24%) maintained at above-average levels through various cycles, compared to peers. Some exposure to construction market cycles. Ample free cash flow, exceptional liquidity, and prudent use of leverage, with expected debt to EBITDA of 2x over

...We expect the company's operating performance to moderate in 2024 amid some macroeconomic pressure, while it maintains debt leverage of about 2x. Allegion PLC's earnings continue to support moderate deleveraging due to good price realization, investments into new products such as smart locks and smart lock integration, and continued bolt-on acquisitions. We believe the publicly funded nonresidential end market will be resilient to market headwinds in 2024, supporting continued earnings growth. We expect this will keep adjusted debt leverage near 2.0x, barring an unanticipated jump in acquisitions or share repurchases other than those we incorporate in the base-case forecast. Despite slower volumes, Allegion will continue to generate above-average EBITDA margins of about 25% with support from its efficient and widespread geographic footprint. We expect EBITDA margins to face some downside pressure (about 50 bps) in 2024 from continued inflation and volume decline. However, we anticipate...

Full Report