Exchange: LSE | Sector: Basic Materials | Industry: Construction Materials
Q4 2024
Published: Feb 18, 2025
Earnings Highlights
Revenue of $945.60M up 5.4% year-over-year
EPS of $1.65 increased by 23% from previous year
Gross margin of 44.1%
Net income of 144.10M
"N/A" - N/A
Allegion plc (0Y5C.L) QQ4 2024 Results Analysis: Resilient Revenue Growth, Solid Margins and Free Cash Flow Amid Leveraged Balance Sheet in a Cyclical Security Products Market
Executive Summary
Allegion delivered a resilient Q4 2024 despite seasonality, reporting USD 945.6 million in revenue, up 5.37% year over year and down 2.22% quarter over quarter. Gross profit rose to USD 416.7 million with a gross margin of 44.1%, while operating income amounted to USD 184.6 million (operating margin of 19.5%). Net income registered USD 144.1 million and diluted EPS of USD 1.65–1.66, supported by EBITDA of USD 217.2 million and a favorable tax rate of roughly 11.2%. Free cash flow reached USD 194.9 million, underpinning a robust cash-generative profile even as the company carries meaningful leverage. The company also executed a USD 100 million share repurchase and a USD 403.2 million debt repayment in the period, underscoring a capital allocation strategy focused on returning capital to shareholders while reducing leverage gradually over time.
On the balance sheet, Allegion shows a solid liquidity position with cash of USD 503.8 million and current assets of USD 1.4223 billion against current liabilities of USD 696.9 million (current ratio 2.04). Total assets stood at USD 4.4878 billion, with goodwill and intangible assets totaling USD 2.059 billion. Total debt was USD 1.9995 billion, yielding a net debt position of USD 1.4957 billion. Interest coverage stood at ~7.3x, and the company generated USD 219 million of operating cash flow versus USD 24.1 million in capital expenditures, producing a meaningful free cash flow yield. The quarterly results reflect a business with healthy profitability and cash generation but with construction-material cyclicality and leverage that warrant close monitoring.
Looking ahead, absent explicit management guidance in the provided data, investors should weigh continued demand for security products across commercial, institutional, and residential markets against ongoing macro headwinds (rates, construction cycles, and competitive dynamics). The near- to mid-term outlook will hinge on the pace of project activity in commercial facilities, price realization, and the company’s ability to deleverage while sustaining cash returns to shareholders.
Key Performance Indicators
Revenue
945.60M
QoQ: -2.22% | YoY:5.37%
Gross Profit
416.70M
44.07% margin
QoQ: -3.56% | YoY:8.15%
Operating Income
184.60M
QoQ: -14.14% | YoY:15.59%
Net Income
144.10M
QoQ: -17.28% | YoY:21.50%
EPS
1.66
QoQ: -17.00% | YoY:22.96%
Revenue Trend
Margin Analysis
Key Insights
Revenue: USD 945.6 million in Q4 2024, YoY +5.37%, QoQ -2.22%
- Revenue: USD 945.6 million in Q4 2024, YoY +5.37%, QoQ -2.22%
- Gross Profit: USD 416.7 million; Gross Margin 44.07% (~0.441)
- Operating Income: USD 184.6 million; Operating Margin 19.52%
- Net Income: USD 144.1 million; Net Margin 15.24%
- EBITDA: USD 217.2 million; EBITDA Margin ~23%
- EPS: USD 1.66 (non-dungent) / Diluted USD 1.65; YoY EPS +22.96%, QoQ -17.00%
- Cash Flow: Operating cash flow USD 219.0 million; Capex USD -24.1 million; Free cash flow USD 194.9 million
- Balance Sheet: Cash & equivalents USD 503.8 million; Total debt USD 1,999.5 million; Net debt USD 1,495.7 million; Current ratio 2.04; Quick ratio 1.43; Debt to capitalization ~0.589; Interest coverage ~7.3x
- Shareholder Return: USD 100.0 million share repurchase; Dividends paid USD 41.4 million
- Liquidity and liquidity-driven ratios: Cash per share USD 5.81; FCF per share USD 2.11; Operating cash flow per share USD 2.36
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
945.60M
5.37%
-2.22%
Gross Profit
416.70M
8.15%
-3.56%
Operating Income
184.60M
15.59%
-14.14%
Net Income
144.10M
21.50%
-17.28%
EPS
1.66
22.96%
-17.00%
Key Financial Ratios
currentRatio
2.04
grossProfitMargin
44.1%
operatingProfitMargin
19.5%
netProfitMargin
15.2%
returnOnAssets
3.21%
returnOnEquity
9.6%
debtEquityRatio
1.43
operatingCashFlowPerShare
$2.36
freeCashFlowPerShare
$2.11
dividendPayoutRatio
26.2%
priceToBookRatio
7.61
priceEarningsRatio
19.8
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Note: The earnings transcript data was not provided in the dataset. As a result, there are no management quotes or thematic highlights to extract. Once transcript access is available, a themes-by-portfolio approach (Strategy, Operations, Market Conditions) with direct quotes will be incorporated, including context and significance for investors.
N/A
— N/A
N/A
— N/A
Forward Guidance
No explicit forward guidance was included in the provided data. In absence of formal guidance, the outlook should be inferred from the quarter’s fundamentals and industry trends: (1) resilient demand for security products in commercial and residential markets — a traditionally defensive end-market; (2) potential margin normalization if input costs stabilize and pricing discipline persists; (3) leverage trajectory will be a key focus, given net debt of USD 1.50 billion against an EBITDA baseline near USD 217 million. Investors should monitor: debt reduction progress, new contract wins or pricing actions, capital allocation policy (buybacks versus dividends versus growth investments), and the pace of market activity in construction-related sectors. If management signals an acceleration in demand or sustained price realization, leverage risk could be mitigated, potentially unlocking multiple expansion and better payout capacity. Conversely, weaker construction activity could pressure top-line growth and extend deleveraging challenges.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0Y5C.L Focus
44.07%
19.50%
9.60%
19.80%
0HOT.L
53.60%
9.24%
19.20%
17.13%
0JZ2.L
40.70%
-9.09%
-33.20%
-6.37%
0LEF.L
59.40%
21.20%
5.19%
35.02%
0QYE.L
50.90%
16.80%
7.46%
37.08%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Allegion demonstrates solid profitability and strong cash generation in QQ4 2024, underpinning a cautious but constructive investment case. The company’s ability to translate revenue resilience into free cash flow, while maintaining a healthy liquidity position, supports shareholder-friendly capital allocation (buybacks and dividends) and a potential path to deleverage. However, the elevated leverage level remains a principal risk, warranting close monitoring of debt reduction progress and capacity to sustain returns during any cyclical downturn. Relative to peers, Allegion sits in the mid-to-upper tier of profitability with a reasonable valuation, suggesting a favorable but cautious stance. The investment thesis is likely to tilt toward a Tactical Hold-to-Moderate-Accretive stance, pending clearer guidance on deleveraging trajectories and any strategic shifts toward higher-margin services and software-enabled offerings.
Key Investment Factors
Growth Potential
Steady demand for security products across commercial, institutional, and residential sectors. Opportunities exist in expanding access control software/services and bundled security solutions, driving higher-margin services revenue. Potential mid-single to low-double-digit revenue growth in favorable cycles; margin uplift possible with continued pricing discipline and productivity gains.
Profitability Risk
High leverage relative to EBITDA (net debt ~ USD 1.50b vs EBITDA ~ USD 217m) poses financial risk and limits buffer against downturns. Construction market cyclicality and end-market softness could impact orders and pricing. Currency exposure exists for a London-listed ticker reporting in USD; potential acquisition integration risk if strategic M&A activity resumes. Competitive pressure from other security solutions providers.
Financial Position
Strong free cash flow generation (USD 194.9m) supports deleveraging and capital returns. Cash balance USD 503.8m and current ratio of 2.04 provide liquidity cushion. However, high goodwill/intangible asset base (USD 2.059b) may imply ongoing impairment risk in a downturn. Dividend payout ratio at ~26% indicates moderate capital return but leaves limited cushion for aggressive growth investments.
SWOT Analysis
Strengths
Solid gross margin (~44%) and operating margin (~19.5%) in a cyclical construction materials-related space.
Positive cash generation with USD 219m operating cash flow and USD 194.9m free cash flow in Q4 2024.
Strong balance sheet liquidity (current ratio ~2.04) and robust cash holdings (~USD 503.8m).
Active capital allocation including a USD 100m share repurchase and debt repayment of USD 403.2m.
Diverse product portfolio in mechanical and electronic security solutions across multiple end-markets (commercial, institutional, residential).
Weaknesses
Significant leverage (net debt USD 1.496b; debt-to-capitalization ~0.589) exposes the company to interest-rate and refinancing risk.
Exposure to construction cycles makes revenue more cyclical than some peers.
Intangible assets and goodwill create headwinds for impairment risk in downturns and may complicate balance sheet flexibility.
Opportunities
Growth in integrated security platforms and software-enabled access control as a service.
Expansion in maintenance, services, and monitoring revenue streams with higher margin profiles.
Targeted acquisitions or partnerships to bolster product breadth and cross-sell across geographies.
Threats
Macro headwinds in construction activity could dampen demand.
Competitive pricing pressures in the security solutions market.
Supply chain volatility and inflationary pressures could impact input costs and working capital.
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