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    ALLE
    Earnings call· Jun 2026(Q2 FY26)

    Allegion plc ALLE

    Jul 23, 2026 Source

    Executive summary

    Allegion Q2 FY26 — Strong Americas Growth and Raised Outlook

    Allegion delivered robust second-quarter results, primarily fueled by strong organic growth in the Americas, which saw significant momentum in non-residential and residential electronics. The company raised its full-year revenue and EPS outlook, reflecting confidence in its largest market, despite facing demand challenges and ERP-related issues in its International segment. Management remains committed to disciplined capital allocation and expects continued margin expansion in the Americas for the second half of the year.

    Highlights

    5

    • Americas organic revenue grew 8.9%, driven by strong non-residential and residential electronics demand.

    • Adjusted EPS increased 17.6% to $2.40 year-over-year.

    • Company-wide adjusted operating margin expanded by 50 basis points to 24.2%.

    • Raised full-year reported revenue outlook to 7.5%-8.5% and adjusted EPS outlook to $8.85-$9.00.

    • Repurchased $120 million of shares in Q2, demonstrating attractive valuation.

    Concerns

    5

    • International segment organic revenue declined 1.2% due to weaker demand in European markets, particularly Germany.

    • International adjusted operating margin decreased 70 basis points year-over-year.

    • Year-to-date available cash flow was down 5.3% to $260.8 million, primarily due to timing of sales and higher receivables.

    • International segment experienced a 120 basis point headwind to margin rate from price and productivity net of inflation and investment.

    • Acquisitions were a 30 basis point headwind to overall company margins and 40 basis points for Americas margins.

    Guidance & targets

    10
    CategoryTargetConfidence
    Full-year reported revenue growth
    7.5% to 8.5%
    high materiality
    High
    Full-year organic revenue growth
    3.5% to 4.5%
    high materiality
    High
    Full-year adjusted EPS
    $8.85 to $9.00
    high materiality
    High
    Americas organic revenue growth assumption
    higher end of mid-single digits
    medium materiality
    High
    International organic revenue growth outlook
    low single-digit organic decline
    medium materiality
    High
    Full-year available cash flow (ACF) conversion
    approximately 85% to 95%
    medium materiality
    High
    Share count assumption
    85.9 million shares
    low materiality
    High
    Americas margin expansion
    expansion
    medium materiality
    High
    International margin performance
    better revenue and margin performance
    medium materiality
    Medium
    Europe restructuring cost benefit
    $10 million annually
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Americas
    Strong organic growth driven by both price and volume in non-residential and residential. Electronics performance was particularly strong in residential. Acquisitions contributed significantly to reported growth.
    Organic growth: 8.9%Non-residential organic growth: high single digitsResidential organic growth: high single digitsElectronics revenue growth: low teens (Q2), high single digits (YTD)Acquisitions contribution to growth: 2.9 pointsAdjusted operating margin increase: 20 basis points
    		$918.6 million11.8%—276.4 million
    International
    Organic revenue declined due to weaker demand in European markets, especially Germany. Acquisitions and currency provided tailwinds to reported revenue. Margins improved sequentially after Q1 ERP disruptions.
    Organic growth: -1.2%Net acquisitions contribution to revenue: 14.3%Currency impact on reported revenue: 3.1%Adjusted operating margin decrease: 70 basis pointsAdjusted operating margin sequential increase: 440 basis points
    		$232.9 million16.2%—28.8 million

    Operational metrics

    17
    Adjusted operating margin
    24.2%up 50 basis points
    Q2 FY26

    Company-wide.

    Price and productivity net of inflation and investment
    $11.8 million
    Q2 FY26

    Company-wide, inclusive of transactional FX.

    Acquisitions impact on margin
    30 basis point headwind
    Q2 FY26

    Company-wide.

    Adjusted EPS
    $2.40increased $0.36 or 17.6%
    Q2 FY26

    Operating income, inclusive of acquisitions, drove majority of growth.

    Available cash flow
    $260.8 milliondown 5.3%
    YTD FY26

    Primarily driven by timing of sales resulting in higher receivable balances.

    Net debt to adjusted EBITDA
    1.6x
    Q2 FY26

    Balance sheet remains healthy.

    Working capital as a percent of revenue
    increased
    Q2 FY26

    Due to acquired working capital and higher receivables.

    Price and productivity net of inflation and investment
    $10.8 million
    Q2 FY26

    Inclusive of transactional FX.

    Transactional foreign currency headwind
    $2 million
    Q2 FY26

    Related to prior year benefit.

    Acquisitions impact on margin
    40 basis point headwind
    Q2 FY26

    As expected.

    Price and productivity net of inflation and investment
    120 basis point headwind
    Q2 FY26

    To margin rate.

    Volume deleverage impact on margin
    headwind
    Q2 FY26

    Contributed to margin decline.

    Acquisitions impact on margin
    80 basis point tailwind
    Q2 FY26

    Offset some declines.

    Dividends paid
    $47 million
    Q2 FY26

    Part of capital allocation.

    Share repurchases
    $120 million
    Q2 FY26

    At current share price levels, company sees attractive valuation.

    Data center business as % of non-res
    approaching 5%
    Q2 FY26

    Still growing very rapidly.

    Europe restructuring annual cost benefit
    $10 million
    Annual

    Actions already completed.

    Industry KPIs

    7
    MetricValueDetails
    Price costfavorable by $11.8 millionUSD
    Order backlogrobust
    Data center hvac exposureapproaching 5%%
    Organic operating leverage30 basis point tailwindbps
    Service aftermarket attach70%%
    Order lead times placement horizona little in advance
    Orders bookings growth by verticalhigh single digits%

    Orderbook & backlog

    1
    Specification activityrobustQ2 FY26

    continued momentum

    Good indication of project work and revenue in the next 12 to 18 months, laying a good foundation for organic growth for the next couple of years.

    Deals & partnerships

    1
    VariousAcquisitions to complement portfolio$70 million

    Acquisitions completed in Q1 FY26. No acquisitions in Q2 FY26.

    Risks & headwinds

    7
    Weaker demand in European marketsQ2 FY26

    International organic revenue declined 1.2%

    Mitigation: Additional restructuring actions taken; expect better revenue and margin performance in H2.

    ERP challenges in International segmentQ1 FY26

    Experienced in Q1, impacted production rates

    Mitigation: Made progress in Q2, expect to catch up on production impacts during the remainder of the year.

    Transactional foreign currency headwindQ2 FY26

    $2 million

    Mitigation: Included in price and productivity calculations for Americas.

    Acquisitions as margin headwindQ2 FY26

    30 basis points company-wide, 40 basis points for Americas

    Mitigation: Expected impact, managed within overall margin expansion.

    Timing of sales impacting cash flowYTD FY26

    Year-to-date available cash flow down 5.3%

    Mitigation: Resulted in higher receivable balances at quarter end; full-year ACF conversion still anticipated at 85%-95%.

    Uncertainty on EPA refund timingFY26

    Not included in outlook

    Mitigation: Prioritizing communication with customers; any refund not expected to have a material impact on EPS.

    Weakness in new build residential marketQ2 FY26

    New build is still weak

    Mitigation: Residential business is 70% weighted to aftermarket, offsetting new build weakness.

    What to watch in Q3 FY26

    5

    International segment margin expansion

    H2 FY26
    Current440 bps sequential increase in Q2
    TargetContinued expansion

    Why it matters

    Indicates recovery from ERP issues and effectiveness of restructuring actions in a challenging demand environment.

    And while we expect better revenue and margin performance in the second half, weak market demand in Europe, particularly Germany, supports reducing our full year outlook to a low single-digit organic decline.

    Q&A highlights

    7

    What drove the strong Americas volume, particularly residential, and what are expectations for H2?

    Q2 saw strong volume across residential and non-residential, with residential electronics being particularly strong. A late-May price increase in Americas led to some pull-forward from Q3 into Q2. The outlook assumes more modest residential performance in H2 due to tough prior-year comps, despite underlying demand being good.

    “The 1 item I would note for Allegion here in the second quarter in the Americas, we did put a price increase out in the market at the end of May. That does result in customers ordering a little in advance of that. So that led to the stronger June you could have seen a little pull forward as you think of Q3 into Q2, but not much.”

    asked by Timothy Wojs · answered by Michael Wagnes

    2 min read6 chapters

    Detailed Narrative

    01

    Americas Performance and Non-Residential Momentum

    The Americas segment delivered strong organic revenue growth of 8.9%, driven by robust demand in both non-residential and residential markets. Non-residential business saw high single-digit organic growth, supported by strong specification activity across core institutional markets, cyclical improvement in commercial verticals like office and multifamily, and rapid growth in data centers. Residential growth was also high single-digits, particularly strong in electronics, though management noted some pull-forward📎 from a late-May price increase.

    02

    International Segment Challenges and Restructuring

    The International segment experienced a 1.2% organic revenue decline, primarily due to weaker demand in several European markets, notably Germany. Despite this, the segment achieved a 440 basis point sequential margin improvement, recovering from Q1 ERP disruptions. In response to the demand environment, the company has taken additional restructuring actions, expecting an annual cost benefit of $10 million, with the full run rate by Q4 FY26.

    03

    Capital Allocation Strategy

    Allegion maintained a balanced and disciplined capital allocation approach. The company spent $70 million on acquisitions in Q1 FY26 and continues to cultivate a pipeline. In Q2 FY26, Allegion paid $47 million in dividends and repurchased $120 million of shares, indicating attractive valuation. The full-year outlook does not factor in additional share repurchases, consistent with past practice.

    04

    Electronics Growth and Mobile Credentials

    Organic investments are focused on electronics, particularly mobile credentials, which are seeing secular growth in higher education and off-campus housing. This trend drives large-scale hardware modernization and deeper customer loyalty. Electronics revenue in the Americas segment grew low teens in Q2 and high single digits year-to-date, aligning with long-term expectations.

    05

    Data Center Opportunity

    Data centers represent a rapidly growing vertical, currently approaching 5% of the non-residential business. Allegion is actively engaging in the design phase and creating end-user standards for data center projects, leveraging specialized products like those from Krieger Specialty Products. This market is expected to generate significant aftermarket sales in the future as the installed base grows.

    06

    Input Costs and Pricing Actions

    The company continues to manage input costs, including tariffs and inflation, through pricing and productivity initiatives. In Q2, price and productivity net of inflation and investment provided an $11.8 million tailwind to company-wide margins. A price increase was implemented in the Americas at the end of May to cover higher inflation, and further actions will be taken if needed. The full-year outlook anticipates being neutral to slightly positive on price/productivity in the Americas.

    AI-generated summary of the company’s earnings call. Not investment advice.