ALLE — Allegion plc

Sentiment as of 2026-09-13 is constructive but not enthusiastic. The July 23, 2026 Q2 print (revenue $1,151.5M, +12.7% reported / +6.9% organic; adjusted EPS $2.40 vs ~$2.21 consensus; adjusted operating margin 24.2%) drove a roughly 13% rally and a raised full-year outlook, and the stock is still +14.5% over three months. But that has been partly surrendered in the last four weeks (-7.7% 1-month, -2.4% 1-week) as macro noise and International/European softness offset the beat. The ratings mix (7 Buy, 16 Hold, 0 Sell, consensus 'Hold', target range $142–$170) says the market respects execution but won't pay up at ~20x trailing for mid-single-digit organic growth; the 2026-09-13 price sits below the average target, so the tone is 'own it, don't chase it.'

Revenue growth is genuinely inflecting. YoY growth ran a remarkably stable ~5.4% for four straight quarters (Q3'24 through Q2'25), then accelerated to +10.7%, +9.3%, +9.7% and +12.7% in Q3'25–Q2'26 (Q2'26 = $1,151.5M). Important caveat: only 6.9pts of that 12.7% is organic — FX and M&A are doing real work on the reported line. Margins are stable rather than expanding: gross margin has been pinned in a 43.8%–45.8% band for twelve quarters (44.9% in Q2'26), and while Q2'26 operating margin of 22.1% beat Q2'25's 21.5%, Q1'26 fell to 18.9% from 20.9% on higher revenue — so TTM operating margin of 20.8% is actually slightly below the prior-year TTM of 21.0%. EPS is lumpy: Q1'26 diluted EPS fell 7.0% YoY to $1.59 while Q2'26 rose 16.2% to $2.15; TTM EPS of $7.62 is up ~5.8%. Cash is the soft spot: FY2025 FCF of $707M (+21.5% YoY) has become $682M TTM, and H1'26 FCF of $261M trailed H1'25's $286M by 8.8% — but TTM net income of $659M still sits below TTM FCF and the accruals ratio of -0.26% says this is working-capital timing, not an earnings-quality problem. Net read: a mid-cycle re-acceleration, not a cyclical trough and not a structural decline.

Fair, leaning modestly cheap versus its own history. As of 2026-09-13: TTM P/E of 20.0x against a 5-year average of 21.2x; P/S of 3.04x against a 5-year average of 3.28x; and just 17.1x the $8.95 next-FY consensus EPS. The headline PEG of 3.45 is an artifact of the trailing EPS base and is not useful — on forward numbers, 17.1x for a business that just grew diluted EPS 16% and earns 16% ROIC is a PEG near or slightly above 1.0, not 3.4. The bear case on price: 6.20x book, ~15x EV/EBITDA on ~$987M TTM EBITDA, and a 1.59% dividend yield. Conclusion: the stock is priced for ~5% growth, not the ~7% organic it just posted — fair with a mild positive skew, but no deep-value cushion.

This is an estimate-revision setup, not a multiple-expansion setup. As of 2026-09-13, consensus next-FY revenue of $4.414B implies only ~2.9% growth over the $4.29B TTM run rate, and next-FY EPS of $8.95 sits barely above management's raised FY2026 adjusted guide of roughly $8.70–$8.90 — i.e., the street is modelling an abrupt slowdown from the +6.9% organic just delivered. That's the bet: if Q3 (late October 2026) confirms Americas non-residential momentum and the guide moves again, you get EPS revisions plus possible re-rating off 17.1x; if the consensus is right, $153 is roughly fair and July was the year's move. Also watch the reported-vs-organic spread — 12.7% reported against 6.9% organic means ~5.8pts came from FX/deals, which is lower-quality and reverses as easily as it arrived.

Range-bound with a mildly constructive tilt. As of 2026-09-13: RSI(14) 44.0 — neither oversold nor overbought; price 2.98% below the 20-day (implied ~$158), 0.27% below the 50-day (implied ~$154) and 1.6% above the 200-day (implied ~$151). Three-month return +14.5% versus one-month -7.7% and one-week -2.4%, with a 52-week range of $125–$183.11 (high set February 2026). Sloppy short-term, but the 50/200-day structure is intact. Implication: not a capitulation entry — RSI 44 offers no oversold bounce — but sitting on the 50-day with a rising 200-day is a workable place to initiate or scale, with the 200-day (~$151) as the level that would invalidate the setup on the Q3 print.

• U.S. non-residential and institutional construction/retrofit demand is the profit engine — Americas adjusted operating margin topped 30% in Q2 2026 — and is currently durable, but exposed to project deferrals if borrowing costs stay elevated or state/local budgets tighten.
• Elevated interest rates are still squeezing new-build activity, especially U.S. residential and European commercial; Allegion's aftermarket, retrofit and code-driven replacement mix is the buffer, and any rate cuts would directly help the construction-exposed slice.
• Tariffs and input-cost inflation: management is offsetting with pricing and productivity, but gross margin has been stuck at 44–46% for three years, so there is no proven cushion to absorb a genuine tariff shock.
• FX and M&A flattered the reported top line — Q2 2026's +12.7% reported versus +6.9% organic means ~5.8pts came from currency and deal activity, and a firmer dollar would compress reported growth fast.
• European/International demand softness is the drag requiring cost discipline, and is a large part of why consolidated TTM operating margin (20.8%) undershoots the Americas segment's margin.

• Q3 2026 earnings, expected late October 2026 — the single biggest near-term event: does Americas non-residential organic growth hold near 7%, and does management push the FY2026 adjusted EPS guide above the current ~$8.70–$8.90 range?
• Software and electronics mix shift — Allegion Optimize (launched September 2026, starting with the LCN Senior Swing auto operator) plus the wider connected-access portfolio is the lever for margin and multiple expansion beyond hardware cyclicality.
• Capital allocation — the $0.55/quarter dividend declared in early September 2026, plus buybacks and M&A; long-term debt has climbed to $2.03B from $1.60B in Q1 2024, so the assets bought with that cash need to earn their cost of capital.
• Analyst estimate revisions — with 16 of 23 ratings at Hold and next-FY EPS of $8.95 barely above the current-year guide, consensus looks stale; a round of upward revisions would be a mechanical tailwind to the shares.

• Non-residential construction rollover — the Americas segment carries the profit pool, and a real macro downturn hits both volume and a 30%+ segment margin; the deterministic growth score's weakness here is not purely a data artifact.
• Cash conversion — H1 2026 FCF of $261M versus $286M in H1 2025 (-8.8%), and TTM FCF of $682M versus FY2025's $707M, despite record revenue. If that is more than working-capital timing, it undermines the dividend/buyback capacity the story leans on.
• Margins are not actually expanding — TTM operating margin of 20.8% is below the prior-year TTM's 21.0% and gross margin has been flat for three years; a cost shock would land with no offset.
• Leverage and rate exposure — debt-to-equity of 0.96x with $2.03B of long-term debt against only $320.6M of cash; refinancing at higher rates is a direct EPS headwind and limits flexibility if construction turns.
• Valuation cushion is thin — 6.20x book and ~15x EV/EBITDA leave little room if organic growth decelerates toward the ~3% that consensus revenue implies.

A buy-the-dip in a quality name, not a bargain-bin situation. Allegion is a 16%-ROIC, 44.8%-gross-margin compounder that just accelerated to +6.9% organic, beat by roughly $0.19 and raised guidance, yet trades at 17.1x next-FY EPS against a 21.2x five-year average — that gap is the opportunity. What keeps it from being an aggressive buy: 0.96x debt-to-equity, a TTM operating margin that is flat-to-down, and H1 cash flow off 8.8% YoY. At $153.35 on 2026-09-13 you are paid roughly 10% to wait for Q3 to confirm the trend; I would want either a slide toward the 200-day (~$151) or the late-October print before treating this as a full position.

Forward P/E method: 18.8x next-FY consensus EPS of $8.95 = $168, a deliberate discount to the 5-year average trailing P/E of 21.2x for ~3% consensus revenue growth, flat 44–46% gross margin and 0.96x debt-to-equity, but a premium to the 17.1x the 2026-09-13 price of $153.35 implies. Cross-checks converge: TTM FCF of $682M at a ~4.8% FCF yield implies ~$14.2B of equity value, or ~$167 on 85.0M shares, and 16x ~$1.0B of forward EBITDA less $1.71B net debt also nets to roughly $168.