Shares of access and security leader Allegion (ALLE +0.33%) soared 12% as of 3 p.m. ET on Thursday after the company rocketed past earnings expectations and raised its guidance for the full year. Sales and adjusted earnings per share rose 13% and 18%, respectively, while management raised its full-year sales growth guidance from 7% to 8% at the midpoint. After experiencing enterprise resource disruptions in Q1, Allegion's strong Q2 results were welcomed by the market today.
NYSE: ALLE
Key Data Points
While locks and security access may not sound like the most exciting business, Allegion is at the forefront of the industry and has delivered annualized total returns of 10% since 2013. The company typically allocates half of its free cash flow to tuck-in acquisitions and has become a rather successful roll-up specialist. This quarter's results show that they're still seeing success with M&A, which added 5 percentage points to Allegion's sales growth.
As Allegion moves beyond mechanical locks and standard closers and expands into more modern applications like electronic readers, e-locks, touchless actuators, and software-based services that work alongside these digital-age solutions, its growth story could add a few chapters. Allegion has always been a steady-Eddie compounder operating in a non-discretionary industry, so if Q2's accelerating growth persists -- especially as the company expands internationally -- it could prove to be an excellent stock to consider at today's reasonable valuation.
Allegion currently trades at just 18 times forward earnings and has grown its dividend payments for 11 straight years. In addition to paying a 1.4% dividend yield, the company has also lowered its share count by 1.2% annually over the last decade, adding another layer of shareholder friendliness for investors to benefit from.
If you're looking for a steady-Eddie stock to lock in as the cornerstone of your portfolio, Allegion is a great option in my eyes at today's reasonable price.
