Allegion plc ALLE, a provider of security solutions for homes and businesses, is set to report first-quarter 2015 results on Apr 30, before the opening bell.
Last quarter, the company posted a positive earnings surprise of 8.57%, primarily due to higher-than-expected revenues in the North America segment and strong margins. Let’s see how things are shaping up for the upcoming announcement.
Factors to Consider
Allegion primarily relies on the commercial and residential construction and remodeling markets for its revenues. Although in the beginning of 2015, the recovery was somewhat stalled due to inclement weather, the housing market currently in U.S. has been picking up momentum of late.
The resurgence in the job market and low mortgage rates are the key factors which are continuing to support the housing recovery. Softer mortgage rates are reducing the cost of homes for a considerable number of households. Therefore, Allegion’s revenues are expected to increase in the to-be-reported quarter, mainly due to the recovery in the housing market in the U.S.
Further, the company should benefit from strategic acquisitions and investments in new technology, as the demand for electronic security products are growing.
Nevertheless, we are concerned about the economic slowdown in certain pockets of the globe, where Allegion has considerable presence. With the economy in Eurozone still sluggish and China's continued slowdown affecting global economy, Allegion’s profits in the first quarter might be under pressure.
Earnings Whispers
Our proven model does not conclusively show that Allegion is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP for Allegion is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 70 cents.
Zacks Rank: Allegion has a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies in the broader industrial products sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
The Babcock & Wilcox Co. BWC, with an Earnings ESP of +2.27% and a Zacks Rank #3.
Deere & Co. DE, with an Earnings ESP of +3.80% and a Zacks Rank #3.
Xylem Inc. XYL, with an Earnings ESP of +3.23% and a Zacks Rank #3.
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