Allegion NYSE: ALLE reported first-quarter 2026 results featuring nearly 10% revenue growth, while management highlighted solid demand in the Americas non-residential market and an execution-driven disruption in one international mechanical business tied to an ERP implementation.
First-quarter results: revenue up nearly 10%, margins pressured
Senior Vice President and Chief Financial Officer Mike Wagnes said first-quarter revenue was “over $1 billion,” up 9.7% versus the prior year. Organic revenue increased 2.6%, which Wagnes said was “driven by price realization, partially offset by volume declines.”
Adjusted operating margin was 21.2%, down 150 basis points year over year, with Wagnes citing “a combination of volume declines and mix.” He added that price and productivity were favorable by $5.3 million “net of inflation and investment,” but still represented a 40 basis point headwind to the margin rate in the quarter due to other factors.
Adjusted earnings per share were $1.80, down $0.06, or 3.2%, from the prior year. Wagnes said EPS benefits from acquisitions were “more than offset by higher tax and interest and other in the quarter.” Available cash flow was $80.3 million, consistent with the prior year.
Americas: non-residential strength offsets softer residential conditions
In the Americas segment, Allegion posted revenue of $809.9 million, up 6.9% reported and up 4.5% organically. Wagnes said the non-residential business increased “mid-single digits organically, driven by price realization,” adding that “demand for our non-res products remains healthy, and spec activity continues to be strong.”
The residential business was flat, with price realization offset by volume declines as “residential markets remained soft,” Wagnes said. During Q&A, CEO John Stone said the company continues to see electronics growth in residential, while new build remains “very soft” and the aftermarket is “probably just treading waters.” Stone added that indicators the company tracks “would indicate, yeah, our market share is definitely holding up.”
Americas adjusted operating income rose 2.9% to $227.4 million, but adjusted operating margin declined 110 basis points. Wagnes said the margin rate was impacted by volume declines and unfavorable mix, as well as a 40 basis point headwind from acquisitions. He also pointed to a transactional foreign exchange headwind tied to the Mexican peso versus a benefit in the prior year.
On mix, Wagnes said the quarter reflected “some negative mix” compared to the prior year, driven by product mix within non-residential. Stone later emphasized the impact was not due to customers trading down to more value-oriented products, saying, “This isn’t a case where someone’s trading down,” but rather “the mix between the various product lines that we offer.”
Stone told analysts spec activity in non-residential has been “strong” and “very strong in recent months,” and he said the company is not seeing meaningful elongation from spec to project execution. He also said the company is not seeing data center activity crowding out other projects in its space, while noting Allegion’s position in data centers has been improving and represents “a small part of our business, but it has been growing nicely.”
International: acquisition-led growth, but ERP disruptions weigh on organic performance
International segment revenue increased 21.5% reported to $223.7 million, but organic revenue declined 5.3%. Wagnes said the organic decline reflected volume weakness in mechanical, “primarily related to the ERP disruptions” discussed by management, partially offset by electronics growth and price realization. Acquisitions contributed 15.9% to revenue, and currency provided a 10.9% tailwind.
International adjusted operating income decreased 4.8% to $17.9 million, and adjusted operating margin fell 220 basis points. Wagnes said price and productivity were a 210 basis point headwind, “inclusive of operational inefficiencies associated with the ERP.”
Stone said the ERP disruption was limited to “one of our legacy mechanical businesses in Europe” and explained it was “not a demand issue,” adding that “the customer orders are there, the backlog is there. It’s our execution that needs to improve.” He attributed the disruption to a legacy system that had been “highly customized over 25, 30 years,” with new workflows slowing production. Stone said production rates had “started to improve” and he expects to recover the first-quarter shortfall “over the balance of the year.”
Asked about demand in Europe, Stone said demand trends were broadly consistent with the company’s expectations from February, reiterating that the “big miss” was driven by the ERP issue. He added that electronics in Europe are “still performing well” and acquisitions are “right on track.”
DCI acquisition and capital deployment
Stone said Allegion closed the acquisition of DCI in March, describing it as a West Coast manufacturer of hollow metal doors and frames with custom design and quick-ship capabilities. Stone said DCI should improve competitiveness on the West Coast by shortening lead times and reducing freight costs compared to serving the region from Allegion’s Cincinnati facility.
Stone noted DCI currently has a “low double-digit EBITDA margin,” resulting in “limited EPS accretion” in the current fiscal year, but said management expects profitability to improve over time through execution and pricing discipline.
For shareholder returns, Stone said the company paid $47 million in dividends and repurchased $40 million of shares in the quarter. Allegion’s board also approved a new $500 million repurchase program. Wagnes said net debt to adjusted EBITDA was 1.7x, which he described as supportive of continued capital deployment.
Guidance: reported revenue outlook raised; organic and EPS guidance affirmed
Stone said the company is raising its reported revenue outlook to 6% to 8% to include DCI, while affirming its organic revenue growth outlook of 2% to 4% and adjusted EPS guidance of $8.70 to $8.90.
In the Americas, Stone said the company is seeing “higher inflation” and anticipates an incremental headwind of about 1% of cost of goods sold from tariffs and other inflation. He said Allegion expects to offset the impact “on a dollar basis through a combination of price and cost actions,” but is not updating organic growth assumptions to include incremental price at this time. Stone said the net impact is expected to be neutral to 2026 adjusted operating income dollars and earnings per share.
On pricing actions, Stone said potential measures could include surcharges or list price increases, but said “they are not yet in the market.” Wagnes added that the mitigation would come “from more pricing than cost actions,” consistent with Allegion’s approach to covering inflation and investment through price and productivity.
Stone also said Allegion has not seen a notable demand impact from the conflict in Iran and that its exposure to the Middle East is “negligible.” On electronics supply chains, he said the company has been monitoring components closely and has not seen major disruptions, adding that Allegion is “better positioned” than during the pandemic period.
About Allegion NYSE: ALLE
Allegion plc NYSE: ALLE is a global provider of security products and solutions focused on ensuring the safety and security of people and property. The company was formed in December 2013 through a corporate spin-off from Ingersoll Rand and is headquartered in Dublin, Ireland. Allegion's core mission is to deliver innovative mechanical and electronic access control systems for a wide range of end markets, including commercial buildings, residential properties, institutional facilities, and industrial sites.
The company's product portfolio spans mechanical locksets, door closers, exit devices, key systems and cylinders, as well as a growing suite of electronic and smart access control offerings.
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