What Allegion (ALLE) Said on Its Q3 Earnings Call

Key Points

• Strong Q3 performance: Revenue rose 9.6% to approximately $1.2 billion, while organic growth reached 7.2%, adjusted operating margin improved to 24.7%, and adjusted EPS increased 13% to $2.60. Growth was led by the Americas, particularly double-digit expansion in non-residential markets.
• Outlook raised: Allegion now expects 2026 reported revenue growth of 9.5%–10.5%, organic growth of 5%–6%, and adjusted EPS of $9.05–$9.10. Management expects non-residential demand to remain strong, while international markets and residential volumes remain challenged.
• Capital deployment continues: The company acquired Overly Door Company for about $90 million, invested an additional $40 million in Ambient.ai, repurchased $120 million of stock, and paid $46 million in dividends during the quarter.

Allegion NYSE: ALLE reported third-quarter results marked by strong growth in its Americas business, led by double-digit organic growth in non-residential markets, while raising its full-year revenue and adjusted earnings outlook.

Third-quarter revenue was approximately $1.2 billion, up 9.6% from the prior year. Organic revenue increased 7.2%, supported by both pricing and volume growth, Chief Financial Officer Mike Wagnes said. Adjusted operating margin rose 60 basis points year over year to 24.7%, while adjusted earnings per share increased 13% to $2.60.

“Third quarter results were driven by strong organic growth in the Americas, led by double-digit organic growth in our non-residential business,” President and Chief Executive Officer John Stone said. He said the company expects strength in non-residential markets to continue into 2027, supported by demand-generation activity and specification-writing trends.

Americas Segment Leads Growth

Americas revenue totaled $942.4 million, up 11.7% on a reported basis and 9.1% organically. The company’s non-residential business grew by low double digits organically, with contributions from price and volume. Residential revenue rose by the mid-single digits, primarily due to pricing, while electronics revenue increased by the low double digits.

Americas adjusted operating income increased 12.6% to $283.8 million. Segment adjusted operating margin rose 20 basis points, as favorable price and productivity more than offset inflation and investments. Acquisitions reduced the segment’s margin rate by 40 basis points.

Stone said the company’s specification activity remains broad-based across end markets. Data centers have become an increasingly important source of demand, accounting for about 5% of non-residential business as of the second quarter and continuing to grow, he said. Allegion supplies doors and door hardware, which Stone described as late-cycle components of data-center construction projects.

Stone also said commercial office demand has shown signs of improvement, citing growth in major metro markets, while institutional and commercial specification activity remains broad-based. However, he noted that skilled trade labor could limit year-over-year market growth.

On residential markets, management said inflation and elevated interest rates continue to restrain demand. Stone said residential volume has been “kind of flattish,” with recent growth largely driven by price realization. The company does not expect a significant medium-term residential recovery, although it also does not anticipate materially worsening conditions.

International Markets Remain Soft

International revenue rose 1.8% to $230.2 million on a reported basis but declined slightly organically, as pricing was more than offset by lower volumes. Acquisitions contributed 2.5% to segment revenue, while currency was a headwind.

International adjusted operating income declined 1.2% to $31.9 million, and adjusted operating margin decreased 40 basis points. Price and productivity, net of inflation and investment, benefited margins by 30 basis points, while acquisitions added 20 basis points. Those gains were offset by lower volume and unfavorable mix.

Stone said the company resolved an enterprise resource planning issue previously identified in the first quarter, restoring normal operations and lead times. Still, demand conditions in Western Europe remain difficult, particularly in Germany, Allegion’s largest international market. The company is focusing on execution and cost management in the segment.

Outlook Raised for 2026

Allegion raised its full-year 2026 outlook, now forecasting reported revenue growth of 9.5% to 10.5% and organic revenue growth of 5% to 6%. The prior increase reflects stronger demand and favorable pricing in the Americas, Stone said.

• Americas organic growth is now projected at 7% to 8%.
• International organic growth is still expected to decline by the low single digits.
• Adjusted earnings per share is forecast at $9.05 to $9.10.
• The outlook assumes a share count of 85.6 million and excludes benefits from future capital deployment.

Management expects to provide its full 2027 outlook in February. For now, the company anticipates demand trends broadly similar to 2026, with Americas growth led by non-residential markets and pricing continuing to support residential performance. It also expects persistent inflation and said it will continue using pricing actions to protect operating profit dollars.

Wagnes said Allegion has shifted from relying mainly on a single annual price increase to taking more targeted and responsive actions as inflation develops. The company expects to announce another broad pricing action early in February 2027, while continuing selective increases where needed.

Capital Deployment and Technology Investments

Allegion completed the acquisition of Overly Door Company in early October for approximately $90 million. Overly manufactures specialty doors for acoustic, blast, bullet-resistant and vault-security applications. Stone said the acquisition complements Allegion’s hollow-metal portfolio and is expected to add about one percentage point to Americas revenue on an annualized basis, with margins consistent with the overall company.

The company also made a $40 million follow-on investment in Ambient.ai through Allegion Ventures. Stone said Ambient’s technology helps security customers shift operations from reactive to proactive approaches through purpose-built artificial intelligence.

During the quarter, Allegion paid $46 million in dividends and repurchased $120 million of stock. Stone said the company sees its shares as attractively valued and expects to remain active in repurchases, alongside bolt-on acquisitions.

Year-to-date available cash flow increased 11.2% to $539.4 million, primarily due to higher earnings. Net debt to adjusted EBITDA stood at 1.5 times, and Allegion continues to expect available cash flow conversion of 85% to 95% of adjusted net income for 2026.

About Allegion (NYSE:ALLE)

Allegion plc NYSE: ALLE is a global security products and solutions company focused on protecting people and property. Its portfolio includes mechanical and electronic locks, access control systems, door closers, exit devices, door controls, and commercial doors and frames.

The company serves commercial, institutional, industrial, and residential customers through well-known brands including Schlage, Von Duprin, LCN, Steelcraft, Briton, and aptiQ. Its offerings range from traditional hardware to connected and electronic access solutions designed for offices, schools, healthcare facilities, multifamily properties, and homes.

Allegion was established as an independent public company in 2013 following its separation from Ingersoll Rand.

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