tapebrief
ALLE · Q4 2025

ALLE · Q1 2026 Earnings

Cautious

Allegion

Reported April 28, 2026

30-second summary

30-second take: Q1 revenue grew 9.7% YoY to $1.034B with adjusted EPS of $1.80, but organic growth came in at just 2.6% — at the low end of the FY 2–4% band — and International organic flipped from +0.9% YoY in Q1 2025 to -5.3% as a European ERP cutover disrupted a legacy mechanical business. Management raised reported revenue guidance 100bps to 6–8% (entirely on the DCI acquisition), reaffirmed adjusted EPS at $8.70–$8.90, but trimmed reported (GAAP) EPS by $0.05 on both ends to $7.95–$8.15 — a quiet acknowledgement that acquisition accretion is offsetting underlying margin pressure rather than adding to it. The setup for the year now depends on a second-half margin recovery that management has explicitly pushed out to Q3/Q4.

Headline numbers

EPS

Q1 FY2026

$1.80

Revenue

Q1 FY2026

$1.03B

+9.7% YoY

Gross margin

Q1 FY2026

44.0%

Free cash flow

Q1 FY2026

$0.08B

Operating margin

Q1 FY2026

18.9%

Key financials

Q1 FY2026
MetricQ1 FY2026YoYQ4 FY2025QoQ
Revenue$1.03B+9.7%$1.03B+0.0%
EPS$1.80—$1.94-7.2%
Gross margin44.0%—44.5%-50bps
Operating margin18.9%—20.3%-140bps
Free cash flow$0.08B———

Guidance

Company raised FY2026 reported revenue growth guidance by 100 bps to 6%–8% (driven by DCI acquisition), while reaffirming adjusted EPS at $8.70–$8.90 but slightly lowering reported EPS to $7.95–$8.15.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

New guidance

MetricPeriodGuideYoY
Adjusted Effective Tax RateFY 202618% to 19%—

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
Reported Revenue Growth
FY 2026
5% to 7%6% to 8%+1 percentage point on both endsRaised
Reported EPS (GAAP)
FY 2026
$8.00 to $8.20$7.95 to $8.15-$0.05 on both endsLowered

Reaffirmed unchanged this quarter: Adjusted EPS ($8.70 to $8.90), Organic Revenue Growth (2% to 4%), Available Cash Flow (85% to 95% of adjusted net income)

Segment KPIs

Q1 FY2026
SegmentQ1 FY2026YoY
Allegion Americas$0.81B+6.9%
Allegion International$0.224B+21.5%
Americas Organic Growth4.5%—
International Organic Growth-5.3%—
Americas Adjusted Operating Margin28.1%—
International Adjusted Operating Margin8.0%—

Other KPIs

Q1 FY2026
SegmentQ1 FY2026
Organic Revenue Growth2.6%
Adjusted Operating Margin21.2%
Available Cash Flow$80.3 million
Adjusted EBITDA Margin22.9%

Management tone

Q1 anchor: tariff bracing → Q2: defensive-to-assertive pivot, first guide raise → Q3: capital deployment narrative, second guide raise → Q4: agility and conservatism → Q1 FY2026: M&A-led top line, operational defense.

The narrative has now fully inverted from Q2 and Q3 of last year. Two quarters ago management was explicitly claiming share at the expense of smaller players and pointing to spec writing as a validated forward indicator. This quarter the reported revenue raise is attributed entirely to the DCI acquisition while organic stays at 2.6%. The press release phrasing is explicit: "raising its full-year 2026 reported revenue growth outlook to a range of 6% to 8%, inclusive of the recent DCI acquisition." That phrasing — inclusive of — is the giveaway. M&A has moved from optionality (Q2 2025) to a programmatic lever (Q3 2025) to the only growth lever being raised against (Q1 FY2026).

The International story has reversed harder than any other thread in the year. This quarter management is defending it with a recovery narrative: "Production rates in the affected legacy mechanical business are improving, and we expect to recover the ERP production related shortfall over the remainder of 2026." The swing from +0.9% YoY organic in Q1 2025 to -5.3% in Q1 2026, with a 220bp adj. op margin contraction, is a hard reset. Management is anchoring credibility on customer orders and backlog still being intact — but the recovery is back-half-loaded and "more ERP implementations" are planned.

The margin sequencing message has also hardened in a way that puts the year at risk. The language to Barclays was explicit: more margin expansion in the back half, with Americas Q2 not expansionary and International Q2 still softer. The full-year adj. EPS guide of $8.70–$8.90 — reaffirmed despite Q1 organic at the low end and International down sharply — now depends entirely on a Q3/Q4 recovery that hasn't started.

Pricing commentary has continued to soften. This quarter: tariffs are again a fresh headwind (~1% of COGS from IEPA, Section 122, Section 232) with pricing actions "not yet announced." Management has committed to EPS-neutral offset on a dollar basis but the price actions are not yet in market.

Q&A highlights

Joe O'Day · Wells Fargo Securities

Inquired about spec-to-order elongation timeline, tariff impacts on pricing, and whether data center demand is crowding out other projects

Management confirmed spec activity remains very strong and broad-based with no meaningful elongation from spec to revenue. Data centers not a crowding-out issue but a growing niche. On tariffs, discussed multiple policy changes (IEPA, Section 122, Section 232) driving ~1% COGS headwind; pricing actions not yet announced but will be communicated, with expectation to mitigate on dollar basis through price and cost actions

Spec activity described as 'very strong' and broad-based~1% of COGS headwind from tariffs and inflationExpected to be neutral to 2026 adjusted operating income dollars and EPSPricing actions not yet in market but will be announced

Tim Weiss · Robert W. Bird and Company

Asked for detail on negative product mix impact in Americas Q1 and margin sequencing expectations through 2026

Management attributed Q1 negative mix to product mix within non-res, noting Q1 2025 had strong volume leverage and positive mix. Expects mix to even out over full year for Americas. Margin rate to improve sequentially; Q2 flat vs prior year due to peso headwind, then expansion in Q3/Q4. DCI acquisition adds ~30 bps full-year margin headwind

Q1 negative mix expected to even out over full yearQ2 margin rate improvement expected but flat vs prior year due to peso headwindQ3/Q4 where margin expansion occursDCI adds ~30 bps full-year margin headwind

Tomo Sano · JP Morgan

Requested breakdown of electronics Q1 volume vs price, deceleration drivers, and ERP execution challenges/recovery prospects in international

Management noted Q1 electronics mid-single-digit growth vs double-digit in Q4 due to tough prior-year comps; full-year non-res volume expected to grow. Electronics still viewed as long-term growth driver. On ERP, confirmed it was isolated to one legacy mechanical business in Europe; production rates recently improving; customer orders and backlog intact; expects recovery of Q1 shortfall over remainder of year

Q1 2025 non-res had higher-end mid-single-digit volume growth creating tough compFull-year non-res volume growth expectedERP implementation isolated to one legacy mechanical business in EuropeProduction rates 'very recently' improving

Jeffrey Sprague · Vertical Research Partners, LLC

Asked about other planned ERP implementations and recovery risks (loss of business share), plus European market conditions and Middle East exposure

Management confirmed more ERP implementations planned but does not expect similar issues; holding onto customer orders with supporting backlog; confident in Q1 recovery over balance of year. On Europe, demand shaping as expected from February guide, electronics performing well, acquisitions on track; markets still soft but not materially worse than outlook

More ERP implementations plannedDo not anticipate problems like Q1 ERP issue againCustomer orders and backlog being heldEuropean demand tracking February guidance

Julian Mitchell · Barclays Equity Research

Asked whether 2026 will be more back-end loaded in EPS given Americas margin headwinds in Q2 and ERP recovery not concentrated in Q2; also inquired on PPII margin headwinds outlook

Management avoided explicit first-half/second-half EPS split but clarified Americas Q2 not expected to show margin expansion; international Q2 similar softness to Q1; real margin expansion in back half. PPII margin expansion expected for full year in Americas; international tougher; enterprise PPII roughly in line with Americas, more in back half. Core business expected to hit 35%+ incremental margins

Americas Q2 margin not expansionary vs prior yearInternational Q2 softer vs prior year margin ratesMargin expansion concentrated in Q3/Q435%+ incremental margins expected from core business

Answers to last quarter's watch list

Whether Q1 FY2026 organic comes in above 2% — Organic printed 2.6%, technically above the threshold but at the low end of the FY 2–4% guide. Management did not raise the organic range despite Q1 coming in, signaling no expected acceleration through the year. Status: Resolved negatively. The "better than expected" Q1 start framing from February didn't translate into upside on the organic line.
Residential trajectory through Q1 and Q2 — The press release does not break out residential growth separately, but states the residential business was flat organically with price realization offsetting volume declines. Americas total organic of 4.5% with management citing non-residential strength is consistent with the FY assumption that residential remains soft.
Continue monitoring
Q1 adj. operating margin trajectory against tough comparables — Enterprise adjusted operating margin of 21.2% was down 150bps YoY versus Q1 2025's 22.7%, with management explicitly confirming Q2 will also be flat-to-down versus prior year. The operating leverage needed to deliver $8.70–$8.90 adj. EPS is now back-half-loaded and contingent on International recovery.
Resolved negatively
International organic growth turning positive — Did not turn. International organic moved from +0.9% YoY in Q1 2025 to -5.3% in Q1 FY2026, with adjusted operating margin down 220bps YoY to 8.0%. Management blames a European ERP cutover and promises recovery, but the inflection narrative is broken.
Resolved negatively
Pricing realization through 2026 — Management disclosed a fresh ~1% of COGS tariff headwind (IEPA, Section 122, Section 232) with pricing actions not yet in market. Management is committing to EPS-neutral offset on a dollar basis but no confirmation of realization yet.
Continue monitoring

What to watch into next quarter

Whether International organic returns toward flat or continues at -5% — management's recovery promise is the single biggest credibility item against the reaffirmed adj. EPS guide. A Q2 International organic below -3% with margin still in single digits would put the $8.70 floor in play.

Tariff pricing actions and whether they hold the EPS-neutral framing — management has committed but not announced; watch the Q2 print for the realization rate against the ~1% COGS headwind.

Americas Q2 adjusted operating margin — management told Barclays Q2 will be flat to prior year on peso headwind. A sequential improvement that fails to match prior year would compress the back-half recovery further.

DCI accretion disclosure — the reported revenue raise was attributed entirely to DCI, but management quantified DCI as a 30bp drag to full-year adjusted operating margin. Watch for explicit dollar accretion to adj. EPS in Q2.

Whether organic growth guide of 2–4% is reaffirmed again in Q2 with H1 likely tracking the low end — a held range with H1 at ~2.5% implies H2 organic acceleration that management has not yet underwritten.

Sources

  1. Allegion Q1 FY2026 press release, filed April 28, 2026 — https://www.sec.gov/Archives/edgar/data/1579241/000157924126000013/exhibit991-pressreleasedat.htm
  2. Allegion Q4 2025 press release and prior-quarter brief (February 17, 2026).
  3. Allegion Q3 2025 press release and earnings call (October 23, 2025).
  4. Allegion Q2 2025 press release (July 24, 2025).

Get the next brief, free.

We publish analyst-grade earnings briefs the same day or morning after every call — headline numbers, segment KPIs, Q&A highlights, and tone analysis. Free during beta.

This is not investment advice.