tapebrief
ALLE · Q4 2025

ALLE · Q1 2026 Earnings

Cautious

Allegion

Reported April 28, 2026

30-second summary

30-second take: Revenue grew 9.7% YoY to $1.034B with adjusted EPS of $1.80, but the print is messier than the headline: organic growth of 2.6% sits at the low end of the FY guide, International organic fell -5.3% on an ERP implementation stumble, and adjusted operating margin compressed to 21.2% from peer-quarter levels. Management raised FY2026 reported revenue growth to 6–8% (DCI acquisition contribution) and reaffirmed adjusted EPS at $8.70–$8.90, but quietly trimmed GAAP EPS by $0.05 at both ends to $7.95–$8.15. The recovery thesis now hinges on H2 — Americas margin expansion is back-half loaded, the ERP shortfall needs to be recouped, and management is asking for patience on a guide that's already running near the bottom of the organic band.

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 full-year reported revenue growth guidance by 1 point to 6%-8% while reaffirming adjusted EPS and organic growth outlooks; reported EPS guidance narrowed slightly lower.

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

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
Reported Revenue Growth
FY 2026
5% to 7%6% to 8%+1 percentage point at both low and high endRaised
Reported EPS
FY 2026
$8.00 to $8.20$7.95 to $8.15-$0.05 at low end, -$0.05 at high end (slight lowering)Raised

Reaffirmed unchanged this quarter: Organic Revenue Growth (2% to 4%), Adjusted EPS ($8.70 to $8.90), Adjusted Effective Tax Rate (approximately 18% to 19%)

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%—

Other KPIs

Q1 FY2026
SegmentQ1 FY2026
Organic Revenue Growth2.6%
Adjusted Operating Margin21.2%
Americas Adjusted Operating Margin28.1%
International Adjusted Operating Margin8.0%
Available Cash Flow$80.3 million
Adjusted EBITDA$236.8 million

Management tone

Narrative arc: Q2 share-gain assertion → Q3 programmatic M&A engine → Q4 quieter reset → Q1 operational stumble with confidence intact.

Management spent the back half of 2025 leaning into "we're gaining share" and "M&A engine" framing. This quarter the dominant theme is recovery from a self-inflicted operational miss, and the language has shifted from offensive to defensive. From the Q&A on the ERP issue: "expect to recover the ERP production related shortfall over the remainder of 2026." That is a softer posture than anything in the Q3 transcript, where pricing and spec activity were framed as durable operating capabilities. The willingness to flag a discrete miss and commit to recovery over six months — rather than promise an immediate Q2 catch-up — is honest, but it changes the cadence of the year.

The pricing/cost narrative has hardened into mechanical offsets. Q3 had management saying "you can expect us to continue to drive price" as a permanent capability. This quarter management quantified a 1% incremental COGS headwind from tariffs and inflation and described pricing as expected to be neutral to adjusted operating income and EPS — back to the defensive Q2 framing of "pass-through, not capture." That is consistent with Q4's tonal degradation on pricing and confirms 2026 is a year of mitigation rather than expansion.

Three quarters ago Americas margin was a 30%-plus story with both price and volume contributing. This quarter the framing is back-half loaded recovery: management confirmed Q2 Americas margin will be flat YoY, not expansionary, with margin expansion concentrated in Q3 and Q4 on easier comps and volume leverage. Core incrementals of 35%+ are still the long-term framework but they only "return" by end of year. The implication is that anyone expecting Q2 to look materially better than Q1 should recalibrate.

M&A framing has shifted from compounding engine to incremental margin drag. Management explicitly called out DCI as a 30bps full-year margin headwind. That is the first time the 2025 acquisition pipeline has been described as a near-term margin cost rather than a programmatic upside — and it explains why the reported revenue raise wasn't accompanied by an adjusted EPS raise.

The electronics deceleration is the subtlest tonal shift. Q3 had management positioning electronics as a structural growth engine. This quarter electronics grew mid-single digits versus Q4's double-digit, and the framing pivots to long-term: management remains "confident in long-term electronics as growth driver" with adoption rates still increasing. "Long-term" is doing work here — it signals near-term volatility that the prior framing didn't accommodate.

Q&A highlights

Joe O'Day · Wells Fargo Securities

Demand trajectory in Americas non-residential: spec activity pacing, timeline from spec to order, tariff/inflationary impact, and data center crowding out effects on other projects.

Spec activity described as strong and broad-based with no meaningful elongation in spec-to-order timelines. Data center opportunities present but not crowding out other business. 1% COGS headwind from tariffs and inflation being addressed through pricing actions (surcharges/list increases) and cost mitigation; expected to be neutral to operating income and EPS.

Spec activity characterized as strong and very broad-basedNo material elongation in spec-to-order conversion timelines1% incremental COGS headwind from tariffs and inflation combinedPricing actions and cost mitigation expected to offset impact dollar-for-dollar

Tim Weiss · Robert W. Bird and Company

Americas margin drivers in Q1: negative mix impact and expected sequencing through the year, particularly Q2 performance.

Q1 mix headwind was driven by product mix within non-residential business (different composition than strong volume/positive mix in Q1 2025). Expect mix to even out over full year. Margin expansion anticipated in back half (Q3/Q4) due to easier comps and volume leverage; Q2 expected flat to slightly positive vs. prior year.

Q1 2025 had strong volume leverage and positive mix; Q1 2026 had negative product mixProduct mix expected to even out over full year for AmericasMargin expansion anticipated in Q3/Q4 vs. sequential improvement in Q2DCI acquisition estimated at 30 bps full-year margin headwind (1 month in Q1, 3 months remaining quarters)

Tomo Sano · JP Morgan

Americas electronics deceleration: volume vs. price drivers in Q1, and outlook recovery; ERP implementation in international mechanical business execution challenges and recovery timeline.

Electronics mid-single-digit growth (vs. Q4 double-digit) driven by tough prior-year comps of strong volume growth. Remain confident in long-term electronics as growth driver; volumes expected positive for full year in non-residential. ERP implementation limited to one European legacy mechanical business; execution improving; confident in recovery of Q1 shortfall over remainder of year despite no demand issues.

Q1 2025 non-residential had higher-end mid-single-digit volume growthQ1 2026 electronics growth mid-single digits vs. Q4 2025 double digitsFull-year non-residential volume growth expected positiveElectronics adoption rates still increasing; identified as long-term growth driver

Jeffrey Sprague · Vertical Research Partners, LLC

Additional ERP implementations planned for 2026; specific recovery outlook for international given risk of losing customers; European market conditions amid geopolitical conflicts.

More ERP implementations in works but don't anticipate problems like Q1 again. Holding customer orders and inbound orders continue; backlog supports recovery outlook over balance of year (not immediate). Europe markets tracking to February guidance; electronics performing well; acquisitions on track; general demand softer but consistent with initial expectations despite geopolitical exposure.

More legacy system upgrades needed in business portfolioConfident will not repeat ERP implementation issuesCustomer orders and backlog intact supporting recoveryRecovery will happen over balance of year, not immediately

Julian Mitchell · Barclays Equity Research

Full-year EPS sequencing: expected back-half loading given Americas margin pressure and ERP catch-up not concentrated in Q2; pricing/productivity headwind trajectory through year.

Does not provide Q2 EPS guidance. Americas Q2 margin expected similar to Q1 (flat YoY, not expansionary). International Q2 margins softer vs. prior year similar to Q1. Margin expansion anticipated in back half. Price/productivity net of inflation expected margin expansion (dollar positive) in Americas; international tougher. Total company core incrementals expected to return to 35%+ by end of year.

Americas Q2 margin expected flat YoY, not expansionaryInternational Q2 margin softer vs. prior yearMargin expansion anticipated in back half of yearAmericas PPII expecting margin expansion, full-year dollar positive

Answers to last quarter's watch list

Q1 2026 Americas margin print — match the "Q1-only" framing or extend into Q2? Americas adjusted operating margin came in at 28.1%, compressed from FY2025's ~28% baseline and well below Q3 2025's 29.9%. In the Q&A, management confirmed Q2 Americas margin will be flat YoY, not expansionary — so the "Q1-only" framing did not hold. Margin expansion is now explicitly back-half loaded to Q3/Q4.
Resolved negatively
Whether residential volume declines moderate or accelerate. The press release and Q&A did not break out residential volume cleanly this quarter; Americas overall organic was 4.5% with non-residential called out as positive. The absence of a residential call-out is itself a signal — the topic dominated Q4 commentary and is conspicuously deprioritized here.
Continue monitoring
Organic growth tracking toward 2–4% — above 3% midpoint signaling sandbag, below 2% forcing revision. Q1 organic was 2.6% — in the lower half of the 2–4% range, not above the midpoint. Management reaffirmed the FY guide unchanged, but the print does not support the sandbag thesis that worked in FY2025.
Resolved negatively
M&A bridge disclosure — per-deal carryover schedule for 2025 acquisitions. Management quantified DCI at a 30bps full-year margin headwind (1 month in Q1, 3 months in remaining quarters) and confirmed the reported revenue raise to 6–8% is "inclusive of the recent DCI acquisition." A clean per-deal schedule was not disclosed, but the directional bridge is now public.
Resolved positively
International organic ex-acquisitions — electronics pulling segment back toward flat? International organic deteriorated to -5.3% from Q4's -2.3%, dragged by the ERP-driven production shortfall in one European mechanical business. European electronics businesses were called "still performing well" but the segment did not move toward flat.
Resolved negatively
FY2026 effective tax rate stepping up to 18–19%. Management reaffirmed the 18–19% adjusted ETR assumption unchanged. No commentary suggested the assumption is conservative; if anything, the quiet $0.05 GAAP EPS trim hints at tax or share-count pressure on the reported side.
Continue monitoring

What to watch into next quarter

Q2 Americas adjusted operating margin — management has pre-flagged "flat YoY, not expansionary." A miss on flat would extend the margin pressure narrative into a third consecutive quarter and force a question on whether the H2 recovery thesis is credible.

International organic excluding the ERP-affected business — Q1 was -5.3% segment-wide; watch for a Q2 disclosure that isolates the ERP drag so investors can see the underlying European demand signal.

ERP shortfall recovery cadence — management committed to recouping the Q1 shortfall over the remainder of 2026, not Q2. Watch whether Q2 International revenue shows any sequential catch-up or whether the recovery is back-end loaded into Q3/Q4.

The GAAP/non-GAAP wedge — the $0.05 GAAP trim with adjusted EPS unchanged implies the wedge is widening. Watch for the Q2 reconciliation to identify whether DCI acquisition costs, restructuring, or tax timing is responsible.

Organic growth lift toward the midpoint — at 2.6% in Q1, the FY 2–4% guide implies an acceleration through the year. Watch whether Q2 prints above 3% or whether the full-year band gets revisited.

Electronics growth rate — Q1's mid-single-digit print versus Q4's double-digit was framed as a comp issue. Watch whether Q2 reaccelerates or whether the deceleration was a leading indicator of slower platform adoption.

Sources

  1. Allegion Q1 2026 press release, filed April 28 2026 — https://www.sec.gov/Archives/edgar/data/1579241/000157924126000013/exhibit991-pressreleasedat.htm

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