Allegion
Tollbooth On Every Door: Durable Cash Generator With Quiet Pricing Power
Allegion is a focused building-security franchise best known for Schlage, LCN and Von Duprin, selling mechanical and electronic locks, door closers, exit devices and access solutions to non‑residential and residential end markets.
The company’s moat rests on brand trust and code‑driven specification, installed‑base switching costs in master key systems and access control, scale manufacturing, and an expanding service footprint following the 2022 Stanley Access Technologies deal.
Recent results show steady mid‑single‑digit organic growth, high‑20s segment margins in the Americas, and strong free cash flow conversion. On a trailing four‑quarter basis through Q2 2025, revenue is roughly 3.88 billion dollars and available free cash flow about 682 million dollars, implying an FCF margin near 18 percent.
Allegion raised its 2025 outlook after Q2 revenue passed 1 billion dollars for the first time, reiterated that tariff headwinds of about 40 million dollars can be offset by pricing, and continues disciplined bolt‑on M&A and buybacks.
Net leverage is modest, cash generation is resilient, and product innovation in smart locks (UWB/matter) supports a long runway in electrification. We would like to own this business for the long term at a price consistent with high‑quality, steady compounders.
Does Allegion have a strong competitive moat?
Allegion’s moat is built on several reinforcing advantages. Schlage, LCN and Von Duprin are among the most specified brands by architects and facility managers in North America, with life‑safety codes and standards embedding these products in building designs.
That installed base creates real switching costs for institutions tied to key systems, credentials, door hardware footprints and integrator ecosystems.
Scale manufacturing and a broad distribution network give Allegion cost and service advantages, while the Stanley Access Technologies acquisition adds a recurring service element that deepens customer relationships. Electronics partnerships (ENGAGE platform integrations with leading PACS providers) widen compatibility and entrenchment.
Risks: rapid innovation by competitors (e.g., ASSA ABLOY’s portfolio moves), potential standard changes (Matter/Aliro), and price pressure in residential. Overall durability remains high given code‑driven specification, installed base and channel breadth.
Sources: Q2‑2025 release; 2024 Form 10‑K (segment mix and margins); ENGAGE and brand pages; ASSA ABLOY/DOJ landscape.
Does Allegion have pricing power in its industry?
Pricing has been a material driver of revenue and margin expansion in 2023–2025. Management expects roughly 40 million dollars of 2025 tariffs to be offset primarily via price realization. Adjusted operating margin in 2024 was 22.8 percent, with the Americas segment at 27.1 percent, indicating meaningful ability to price above cost.
Electronics carry higher ASPs and margins, supporting mix‑led improvement. Constraints: competitive pressure in residential, channel dynamics with big‑box retail, and cycles in non‑residential construction. Nevertheless, recurring service and spec‑driven commercial demand provide room to hold price in line with inflation over time.
Sources: Q2‑2025 release and outlook; 2024 Form 10‑K and Q4‑2024 release.
How predictable is Allegion's business?
Revenue and cash flows are aided by code‑driven, spec‑oriented demand and a growing installed base of electronic locks and automatic doors requiring maintenance. TTM revenue through Q2 2025 is about 3.88 billion dollars with available FCF 682 million dollars, and the company targets available cash flow at 85–90 percent of adjusted net income.
The mix is majority U.S. (about 76 percent of 2024 revenue) and majority mechanical, but electronics (25 percent) and services/software (~7 percent) are rising. Predictability is tempered by cyclical residential exposure and capital spending in certain verticals, yet non‑residential and institutional end markets help smooth cycles.
Sources: 2024 Form 10‑K (mix, geography); Q2‑2025 release and 10‑Q; Q3‑2024 revenue reference.
Is Allegion financially strong?
Balance sheet strength is solid.
As of Q2 2025, Allegion held about 657 million dollars in cash against roughly 2.07 billion dollars of debt, with net debt near 1.41 billion dollars after repaying 2024 maturities and issuing 2034 notes at 5.6 percent in May 2024. Free cash flow conversion is strong (2024 available FCF 583 million dollars; TTM ≈ 682 million dollars).
Net debt to EBITDA is roughly in the low‑1x to mid‑1x range based on ~25 percent adjusted EBITDA margins and revenue scale, giving ample flexibility for bolt‑ons and buybacks. Sources: Q2‑2025 release and 10‑Q; 2024 10‑K; senior notes press release.
How effective is Allegion's capital allocation strategy?
Management deploys capital across organic investments (electronics, manufacturing regionalization), disciplined bolt‑ons (Trimco, Next Door, Lemaar, Novas, UAP, Brisant), regular dividends (raised 6 percent to 0.51 dollars quarterly in 2025), and opportunistic buybacks (about 220 million dollars repurchased in 2024; additional repurchases in 1H25).
SBC is modest (~28 million dollars pre‑tax in 2024), and share count is trending down (diluted shares ~86.6 million YTD 2025). M&A focus is adjacent and spec‑heavy categories that fit channels and improve portfolio quality, with integration discipline shown since the 2022 Access Technologies deal.
Sources: 2024 10‑K; dividend and M&A releases; Q2‑2025 release; 1H25 repurchase disclosures.
Does Allegion have high-quality management?
CEO John H. Stone (appointed 2022) brings a strong operational and technology background from Deere, has emphasized portfolio quality, electronics, and services, and has communicated clear financial guardrails (FCF conversion, margins). Governance appears sound with a seasoned board and disciplined disclosure.
Insider alignment is reasonable; Stone has added to personal holdings. Execution since 2022 includes integrating the Access Technologies service business, delivering margin expansion, and completing targeted bolt‑ons. Sources: CEO bio and succession PR; proxy/board disclosures; insider purchase reporting.
Is Allegion a quality company?
Allegion is a good quality company with a quality score of 86/100
- Multi‑moat model: brand/specification, installed‑base switching costs, scale manufacturing, and growing service revenue support durability
- Consistent cash engine: TTM available FCF ≈ 682 million dollars on 3.88 billion dollars of sales; 2024 GAAP operating margin 20.7 percent, adjusted 22.8 percent
- Balanced capital allocation: recurring dividends (11th consecutive raise in 2025), opportunistic buybacks, and targeted bolt‑on acquisitions across Americas and International
- Moderate leverage with strong liquidity: Q2 2025 cash ≈ 657 million dollars, total debt ≈ 2.07 billion dollars; net debt roughly 1.41 billion dollars
- Secular tailwinds: code compliance, safety/security, and electronic adoption; near‑term risks include residential softness, competitive smart‑lock dynamics, and tariff/currency exposure
What is the fair value of Allegion stock?
Is Allegion a good investment at $164?
The following analysis is provided for informational and educational purposes only. It does not constitute financial advice, investment advice, or a recommendation to buy or sell any security. The opinions expressed are based on publicly available information and historical data. Beanvest and its contributors may hold positions in the securities mentioned. Investors should conduct their own due diligence or consult a licensed financial advisor before making any investment decision.