tapebrief
ALLE · Q3 2025
ALLE · Q1 2026

ALLE · Q4 2025 Earnings

Cautious

Allegion

Reported February 17, 2026

30-second summary

30-second take: Q4 revenue grew 9.3% YoY to $1.033B with adjusted EPS of $1.94 and organic growth of 3.3% — enough to land FY2025 organic at 4.1%, near the high end of the 3.5–4.5% guide. The pivot is in the FY2026 outlook: organic growth guided to 2–4% (below FY2025's 4.1% actual) and reported revenue +5–7% (versus 7.8% in FY2025), with adj. EPS of $8.70–$8.90 implying 7–9% growth on a slower top line. After two consecutive guide raises, management is now telling the buyside underlying demand is cooling and 2026 leans more on price/M&A carryover than volume.

Headline numbers

EPS

Q4 FY2025

$1.94

Revenue

Q4 FY2025

$1.03B

+9.3% YoY

Gross margin

Q4 FY2025

44.5%

Operating margin

Q4 FY2025

20.3%

Key financials

Q4 FY2025
MetricQ4 FY2025YoYQ3 FY2025QoQ
Revenue$1.03B+9.3%$1.07B-3.5%
EPS$1.94—$2.30-15.7%
Gross margin44.5%—45.8%-130bps
Operating margin20.3%—21.8%-150bps

Guidance

FY2025 results beat reported revenue and EPS guidance; FY2026 outlook materially lowers organic growth to 2–4% from 4.1%, signaling significant deceleration ahead.

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

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
Revenue (reported)FY20257.0% to 8.0%7.8%+0.8pts above high end of guideBeat
Organic Revenue GrowthFY20253.5% to 4.5%4.1%in-line (at 41% of range)Beat
EPS (non-GAAP)FY2025$8.10 to $8.20$8.14in-line (at 40% of range)Beat
Available Cash FlowFY202585% to 95% of adjusted net income$685.7 million; 17.6% YoY growthStrong execution vs. conversion range targetBeat

New guidance

MetricPeriodGuideYoY
Revenue (reported)FY20265% to 7%—
Organic Revenue GrowthFY20262% to 4%—
EPS (non-GAAP)FY2026$8.70 to $8.90—

Segment KPIs

Q4 FY2025
SegmentQ4 FY2025YoY
Allegion Americas$0.796B+6.1%
Allegion International$0.238B+21.5%
Americas Non-Residential Organic GrowthHigh-single digits—

Other KPIs

Q4 FY2025
SegmentQ4 FY2025
Organic Revenue Growth (Q4)3.3%
Organic Revenue Growth (Full Year)4.1%
Adjusted Operating Margin (Q4)22.4%
Adjusted Operating Margin (Full Year)23.2%
Available Cash Flow (Full Year)$685.7 million
Available Cash Flow Growth (YoY)17.6%
2026 Organic Revenue Growth Guidance2% to 4%

Management tone

Q1 anchor: tariff bracing → Q2: defensive-to-assertive pivot, first guide raise → Q3: capital deployment as the dominant narrative, second guide raise → Q4: agility and conservatism replacing share-gain swagger.

Three quarters ago management was halving the tariff headwind and claiming share from smaller players; this quarter the dominant phrase in FY2026 framing is "will remain agile as we execute our strategy." The vocabulary shift from offense in Q2 and Q3 to flexibility language is the single clearest tone change of the year. It signals management has reduced confidence in calling the trajectory of end markets into 2026 and prefers to preserve optionality rather than commit to a directional read.

The residential narrative has bifurcated again, but in the opposite direction from Q3. A quarter ago management split residential into a soft market with Allegion growing mid-single digits on new electronics products; this quarter management acknowledged Q4 residential ended softer than they had contemplated, and that the 2026 outlook assumes Americas residential will be down slightly. The Q3 share-gain-on-soft-market story didn't hold for one quarter. That's relevant because the Q3 watch list specifically flagged whether new product cadence would carry through Q4 — it didn't.

Pricing commentary has cooled meaningfully. Q3 framing was operationalized, programmatic, EPS-neutral surcharge revenue. This quarter management told Mizuho's Brett Lindsay that the 2026 going-in assumption is that inflation will be a little less than 2025, that the mix is shifting toward more list price increases rather than surcharges, and that total pricing will therefore be a little less than last year. For a company whose Q3 narrative depended on pricing power offsetting inflation, the explicit guide-down on pricing contribution is a tonal admission that the tariff-pricing tailwind has run its course.

The one thread that genuinely strengthened is capital allocation. Management deployed approximately $630M to M&A in 2025, raised the dividend for the 12th consecutive year, and reiterated a clear hierarchy (organic > dividend > M&A > buybacks) in response to Bank of America's Andrew Obin. After two years of building integration muscle, this quarter the framework is articulated and defended — but notably, organic deceleration is the backdrop against which it now operates.

Q&A highlights

John O'Day · Wells Fargo

What drove the softer-than-anticipated Q4 residential market, whether it was destocking or sell-through demand, and were there any pricing adjustments needed in response to the weaker demand environment?

Management confirmed residential ended softer than expected. Q1 2026 started better. No short-term pricing reactions occurred, and the channel doesn't hold significant inventory so corrections are brief. Management expects residential to remain soft in 2026 but is positioned to capture upside if markets improve.

Q3 2025 had mid-single-digit residential growthQ4 2025 residential growth was softQ1 2026 started off better than expected2026 outlook assumes residential will be down slightly

Tomohiko Sano · JP Morgan

Can you break down the contributions from pricing, productivity, and acquisition synergies to margin expansion, and which will be most important in 2026?

Management stated that detailed margin component breakdowns are in the 10-K. At enterprise level, price and productivity exceeded inflation and investment, providing margin tailwind. In Americas specifically, it was a headwind due to residential volume deleverage. For 2026, expects price and productivity to be positive on dollar basis and non-negative on margin rate basis, with first quarter having tough comparables.

Price and productivity exceeded inflation and investment on enterprise basis in 2025Price and productivity was headwind in Americas region in 2025Q1 2026 will have tough comparables from prior yearFull year 2026 expects price/productivity positive on dollar and margin rate basis

Brett Lindsay · Mizuho

What is the expected pricing capture net basis for 2026 given the conversion from surcharges to list price, and how is this calibrated within the guidance framework?

Management expects 2026 to feature more list price increases and less surcharging. Assuming lower inflation than 2025, total pricing in 2026 will be lower than 2025. Management will remain agile and adjust if environment changes. Americas organic guidance of 2-4% implies more pricing than volume contribution.

2026 assumes lower inflation than 2025Shift from surcharges to more list price increases expectedTotal pricing expected to be lower in 2026 than 2025Americas 2-4% organic growth implies more pricing than volume

Robert Schultz · Fed

For Americas in 2026, what is management assuming for institutional versus commercial volume growth, and are they expecting outperformance in one of these verticals?

Management declined to provide sub-vertical volume growth details, citing broad end-market exposure and reliance on spec writing trends. Referenced prepared remarks on diversified business model and noted they prefer not to isolate individual verticals within non-residential.

Management declined to break out institutional vs. commercial volume growthBroad end-market exposure and spec writing trends support outlookNon-residential expected to show high single-digit organic growth

Andrew Oban · Bank of America

Why did management choose M&A acceleration over Allegiant stock buybacks in 2025, given consistent EPS growth in tough markets, and what was the board's thought process?

Management reiterated capital allocation priority: profitable organic growth, dividend growth commensurate with earnings, and opportunistic share repurchase. When attractive acquisition targets exist that can be integrated into existing business units with synergies and accretive returns, M&A is prioritized. Expects balanced, disciplined, and consistent capital allocation approach.

$630 million deployed to acquisitions in 2025$80 million in share repurchases in 2025$175 million in dividends paid in 202512th consecutive annual dividend increase announced

Answers to last quarter's watch list

Whether Q4 organic decelerated as the unchanged 3.5–4.5% FY guide implied — Q4 organic printed 3.3%, below the FY range midpoint. The Q3 thesis that management was sandbagging into 2026 didn't hold; the implied Q4 step-down was real, and management is now guiding FY2026 organic to 2–4%, below FY2025's 4.1% actual.
Resolved negatively
International adj. operating margin sustainability after the Q3 step-up — Q4 International adj. operating margin came in at 16.7%, up 90bps YoY, driven primarily by accretive acquisitions. Organic revenue declined 2.3% in the quarter, so the growth is acquisition-led; margin durability ex-M&A remains the open question.
Continue monitoring
Americas residential growth durability — Did not hold. Q3's mid-single-digit growth flipped to down high-single digits organically in Q4, and FY2026 guidance assumes residential is down slightly. The new-product share-gain narrative from Q3 lasted exactly one quarter.
Resolved negatively
February 2026 outlook for incremental margin rate and M&A accretion — FY2026 adj. EPS of $8.70–$8.90 implies 7–9% earnings growth on 5–7% reported revenue growth, consistent with operational leverage but not explicitly tied to the mid-30s incremental target. M&A spend of approximately $630M for FY2025 was disclosed but specific 2026 accretion sizing remains soft.
Continue monitoring

What to watch into next quarter

Whether Q1 2026 organic comes in above 2% — management said Q1 started "better than expected" but Q1 also carries the toughest price/productivity comparable from prior-year tariff surcharges. A sub-2% Q1 organic print would put the low end of the FY guide in play immediately.

Residential trajectory through Q1 and Q2 — FY2026 assumes "down slightly." Any deeper decline would force a re-rate, while a return to growth would validate management's "agile" framing as conservative positioning.

Q1 adj. operating margin trajectory — management flagged Q1 as having tough comparables. A weak Q1 margin print would call into question whether the operating leverage needed to deliver $8.70–$8.90 EPS is achievable.

International organic growth — Q4 organic was -2.3% with 21.5% reported growth heavily M&A-driven; the underlying organic line needs to turn positive for the inflection narrative to hold.

Pricing realization through 2026 — management explicitly guided total pricing lower in 2026. Watch whether the surcharge-to-list-price conversion sticks with customers or triggers volume elasticity.

Sources

  1. Allegion Q4 2025 press release, filed February 17, 2026 — https://www.sec.gov/Archives/edgar/data/1579241/000157924126000006/exhibit991-pressreleasedat.htm
  2. Allegion Q3 2025 press release and earnings call (October 23, 2025).
  3. Allegion Q2 2025 press release (July 24, 2025).

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