Last Update04 Oct 25Fair value Increased 1.67%
Analysts have raised their price target for Allegion by $2.91 to $177.55, citing improved industry trends and reduced downside risk. This adjustment is supported by healthier market indicators.
Analyst Commentary
Analyst updates reflect a measured improvement in sentiment toward Allegion, with revised ratings and adjusted price targets reflecting shifting industry conditions and company performance.
Bullish Takeaways- Bullish analysts highlight reduced downside risk for Allegion, citing a healthier industry backdrop and the company’s ability to navigate previous market softness.
- Encouraging indicators in Allegion’s main industry verticals suggest stronger underlying demand compared to the previous year. This could support continued growth and margin recovery.
- Improvement in the Americas non-residential segment is seen as a positive. Most of that market is emerging from a recent soft patch, enhancing Allegion’s operational outlook.
- Raised price targets suggest increased confidence in Allegion’s near-term execution and an improved risk-reward profile for investors.
- Some caution remains as analysts adopt a neutral stance, maintaining Equal Weight ratings and signaling a balanced view on potential upside versus risks.
- Despite the improved outlook, lingering concerns about the pace of sustained growth and Allegion’s ability to fully capitalize on recovering industry demand persist.
- Execution risks and external market headwinds are still factored into current analyst valuations. This tempers expectations for a rapid acceleration in performance.
What's in the News
- Allegion US launched the Schlage Performance Series Locks, designed for commercial real estate and multifamily projects. The new locks offer streamlined installation and new decorative options. (Product-Related Announcements)
- The company introduced Motorized Latch Retraction mortise locks within the Schlage L Series, expanding hands-free access and security options across multiple sectors. (Product-Related Announcements)
- Between April and June 2025, Allegion completed a share repurchase of 284,000 shares for $39.95 million. This marked the end of a $1.02 billion buyback program. (Buyback Tranche Update)
- Allegion continues to pursue strategic acquisitions and recently added Gatewise, a Software-as-a-Service gate entry system for multifamily communities, to enhance its security and access portfolio. (Seeking Acquisitions/Investments)
- The company raised its 2025 guidance and now expects 6.5% to 7.5% revenue growth along with an increased earnings per share outlook. (Corporate Guidance Raised)
Valuation Changes
- Consensus Analyst Price Target has increased slightly from $174.64 to $177.55, reflecting improved outlooks.
- Discount Rate has risen marginally from 9.01% to 9.04%, indicating a minor adjustment in perceived risk.
- Revenue Growth projections remain virtually unchanged and are holding steady at approximately 7.39%.
- Net Profit Margin estimates are stable and remain at around 17.36%.
- Future P/E ratio has risen modestly from 22.25x to 22.64x, suggesting a slightly higher valuation multiple.
Key Takeaways
- Expansion in digital security and strategic acquisitions is boosting recurring revenue and enhancing the company's margin profile through innovative product offerings.
- Strong demand in institutional and nonresidential markets, combined with operational discipline, is driving stable growth and reducing earnings volatility.
- Heavy reliance on nonresidential cycles, international weakness, cost pass-through risks, aggressive acquisitions, and slow innovation in the mechanical business all threaten Allegion's long-term growth and competitiveness.
Catalysts
About Allegion- Engages in the provision of security products and solutions worldwide.
- Robust expansion in smart and connected security solutions-particularly through strong electronics growth (double-digit in Q2) and new launches like SimonsVoss's batteryless FORTLOX electronic cylinder-positions Allegion to benefit from increased adoption of IoT and digital building management, supporting higher future revenues and improved margin mix.
- Rising global focus on safety and security, especially in resilient institutional and nonresidential markets (healthcare, education, data centers), is fueling demand for advanced security solutions, providing steady end-market growth that supports sustainable earnings and lowers revenue cyclicality.
- Strategic investments in electronic/software acquisitions (ELATEC, Gatewise, Waitwhile) are expected to drive new recurring revenue streams and margin accretion starting in 2026, enhancing both top-line growth and net margin profile as SaaS and high-margin hardware gain share of the portfolio.
- Execution of targeted M&A and effective integration are broadening Allegion's geographic and product reach, with accretive acquisitions improving adjusted EPS and providing operational leverage that supports long-term earnings growth.
- Resilient nonresidential Americas growth, combined with improved operational performance and disciplined pricing actions to mitigate inflation/tariff impacts, are expanding adjusted operating margins and providing a foundation for ongoing cash flow and earnings stability.
Allegion Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Allegion's revenue will grow by 7.1% annually over the next 3 years.
- Analysts assume that profit margins will increase from 16.2% today to 17.3% in 3 years time.
- Analysts expect earnings to reach $825.7 million (and earnings per share of $10.09) by about September 2028, up from $626.2 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.2x on those 2028 earnings, down from 23.3x today. This future PE is lower than the current PE for the US Building industry at 23.0x.
- Analysts expect the number of shares outstanding to decline by 1.25% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 9.04%, as per the Simply Wall St company report.
Allegion Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Persistent weakness in the International segment, with continued organic revenue declines driven by underperformance in the mechanical portfolio, could signal ongoing challenges in markets outside North America, leading to long-term earnings volatility and reduced revenue growth from global expansion.
- Residential markets remain soft in the Americas, attributed to high interest rates, suggesting that Allegion's growth is heavily reliant on the nonresidential cycle; any downturn or deceleration in nonresidential construction would put significant pressure on overall revenue and margin expansion.
- The ongoing need to pass cost inflation through surcharges and price increases, particularly in response to volatile tariffs, risks exposing Allegion to future pricing pressures, potential customer resistance, or regulatory changes, which could erode margins or dampen demand, impacting both near
- and long-term profitability.
- Heavy emphasis on acquisitions and integration to drive growth, while currently successful, leaves Allegion exposed to execution risk, potential cultural or operational mismatches, and the possibility of overpaying, which could result in impaired returns and weaker net margins if synergy capture and operational leverage do not materialize as planned.
- The slow pace of growth or innovation in Allegion's legacy mechanical business, particularly as secular trends accelerate toward advanced, integrated, and cloud-based access control, raises the risk of market share loss to more technologically advanced competitors, endangering Allegion's long-term relevance and its ability to sustain revenue and earnings growth.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $172.636 for Allegion based on their expectations of its future earnings growth, profit margins and other risk factors.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.8 billion, earnings will come to $825.7 million, and it would be trading on a PE ratio of 22.2x, assuming you use a discount rate of 9.0%.
- Given the current share price of $169.97, the analyst price target of $172.64 is 1.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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