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, closing FY2025 at $4.067B (+7.8%) and adjusted EPS of $8.14 — at the midpoint of the raised $8.10–$8.20 guide. The bigger signal is FY2026: management set reported revenue growth at 5–7% (vs. 7.8% delivered) and organic at 2–4% (vs. 4.1% delivered), implying a 100–200bps organic deceleration and only 7–9% EPS growth at the midpoint despite ~2 points of M&A carryover. After two consecutive raise quarters, this is a reset to a more cautious 2026 setup.

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

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$1.03B	+9.3%	$1.07B	-3.5%
EPS	$1.94	—	$2.30	-15.7%
Gross margin	44.5%	—	45.8%	-130bps
Operating margin	20.3%	—	21.8%	-150bps

Guidance

Company delivered FY2025 results at/above prior guidance while issuing FY2026 guidance implying significant growth deceleration (5-7% reported revenue growth vs. 7.8% FY2025 actual; 2-4% organic growth vs. 4.1% FY2025 actual).

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

Metric	Period	Prior guide	Actual	Δ	Result
EPS (non-GAAP)	FY 2025	$8.10 to $8.20	$8.14	in-line (at midpoint of prior range)	Beat
Reported Revenue Growth	FY 2025	7.0% to 8.0%	7.8%	+0% above guide (slightly above midpoint)	Beat
Organic Revenue Growth	FY 2025	3.5% to 4.5%	4.1%	in-line (within range)	Beat

New guidance

Metric	Period	Guide	YoY
EPS (non-GAAP)	FY 2026	$8.70 to $8.90	—
Reported Revenue Growth	FY 2026	5% to 7%	—
Organic Revenue Growth	FY 2026	2% to 4%	—
Adjusted effective tax rate	FY 2026	approximately 18% to 19%	—
Average diluted share count	FY 2026	approximately 86.6 million shares	—

Segment KPIs

Q4 FY2025

Segment	Q4 FY2025	YoY
Allegion Americas	$0.796B	+6.1%
Allegion International	$0.238B	+21.5%
Americas Non-Residential Organic Growth (Q4)	High-single digits	—
Americas Adjusted Operating Margin (Q4)	27.1%	—
International Adjusted Operating Margin (Q4)	16.7%	—

Other KPIs

Q4 FY2025

Segment	Q4 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

Management tone

Narrative arc: Q2 share-gain assertion → Q3 programmatic M&A engine → Q4 quieter reset.

Management's posture has shifted from "raising outlook" to "estimated to be." Q3's prepared remarks were full of upgrades — raised EPS, raised revenue growth, widened cash conversion. The Q4 release language reverts to neutral framing ("Full-year 2026 reported revenue growth is estimated to be 5% to 7%"), with no claims of acceleration. After two consecutive raise quarters, an FY2026 organic guide whose midpoint (3%) sits below the FY2025 actual (4.1%) is the tonal signal — management is choosing room to maneuver over headline ambition.

The residential framing has degraded further. Q2 called residential "soft but stabilizing"; Q3 reframed it as a product-innovation story; Q4 Q&A confirmed it ended the year "softer than anticipated" with a high-single-digit volume decline, and management is "taking the prudent assumption of continued softness" into 2026. The product-innovation pivot did not hold. From the Wells Fargo Q&A: residential started Q1 2026 better but the company is not modeling a recovery. That is a more honest baseline than the Q3 framing.

Pricing tone has shifted from offensive to mechanical. Q3 had management saying "you can expect us to continue to drive price to offset inflation." Q4 Q&A reframes 2026 pricing as "more list price increases vs surcharges" with "less total pricing than 2025 due to lower expected inflation." Pricing remains positive in dollar terms, but the language is no longer about competitive capture — it's about offsetting a smaller inflation envelope. This is the underlying reason organic growth guidance starts lower.

M&A framing remains the consistent bull lever. The Q&A described the pipeline as "very active" in both Americas and International, aligned to the May Investor Day framework. The carryover from the 2025 deals is what bridges reported growth (5–7%) above organic (2–4%) in 2026 — management quantified this as approximately two points of carryover M&A contribution, primarily in Allegion International.

The Q1 2026 setup was flagged repeatedly: tough margin comp because the prior-year quarter lacked inflation and investment offsets. Morgan Stanley's exchange clarified that Q1 is the only quarter where margin expansion is hampered, with core ~35% incremental margins resuming Q2–Q4. That is a useful disclosure — it tells you not to read Q1 weakness as thesis breakage.

Q&A highlights

John O'Day · Wells Fargo

What caused Q4 residential softness, whether it was destocking or demand-driven, extent into early 2026, and pricing adjustments needed

Residential ended softer than anticipated throughout 2025; Q1 2026 started better but company taking prudent assumption of continued softness; no short-term pricing reaction needed; channel inventory low so corrections brief

Q3 2025 had mid-single digit residential growthQ4 2025 residential growth was softQ1 2026 started off betterNo pricing pressure from demand softness

Tomohiko Sano · JP Morgan

Breakdown of margin contributions from pricing, productivity, and acquisitions; which levers most important in 2026; international demand recovery timeline for Western Europe and Australia

Price and productivity exceeded inflation on dollar basis in 2025; expected to be positive on both dollar and rate basis in 2026 except Q1 due to comp; residential volume deleveraged Americas margins; electronics leading international growth particularly in Western Europe dock systems; Australia/NZ improving off weak comps; mechanical markets sluggish

Price and productivity positive on dollar basis full year 2026Q1 2026 has tough comparable from prior year lacking inflation impactsFull year margin expansion expected in AmericasElectronics businesses performing well, primarily Western Europe-based

Brett Lindsay · Mizuho

Pricing dynamics for 2026 including surcharge-to-list conversion and incremental list increases; investment allocation flexibility; Q4 Americas margin impact from investment timing

2026 assumes more list price increases vs surcharges; less total pricing than 2025 due to lower expected inflation; price expected to exceed volume growth in Americas and enterprise; price and productivity fund investments and inflation; Q1 margins pressured by tough prior year comp lacking inflation/investment

2026 focuses more on list price increases than surchargesExpected inflation lower than 2025 driving less pricingAmericas and enterprise expect more pricing than volumeQ1 2026 margin headwind from prior year lacking inflation/investment

Robert Schultz · Fed

Americas volume growth assumptions for 2026 by institutional vs commercial verticals; M&A pipeline activity and competitive dynamics

Management declined to break out volume growth by vertical; referenced broad end-market exposure and spec activity supporting outlook; M&A pipeline very active in both Americas and International segments aligned to strategic framework of core mechanical, electronics, and software; commitment to disciplined approach focused on competitive advantage and right to win

M&A pipeline very activeFocus areas: core mechanical, electronics, complementary softwarePipeline encouragingly busyDisciplined capital deployment approach maintained

Chris Snyder · Morgan Stanley

Americas Q4 margin decline despite positive mix and productivity; whether Q2-Q4 2026 targets return to 35% incremental margins after Q1 tough comp

Q4 margin decline driven by residential volume decline of high single digits far exceeding total residential decline (10-15 point delta vs Q3); fundamentals remain sound post-Q1; core incrementals consistent with Investor Day despite Q1 margin pressure; business can leverage volume once Q1 tariff math comp clears

Q4 residential volumes declined high single digitsQ3 residential volumes grew mid-single digits10-15 point volume delta explains margin difference between Q3 and Q4Core incrementals of ~35% hold post-Q1 per Investor Day

Answers to last quarter's watch list

FY organic growth at or above 5%, forcing higher Q1 2026 baseline. Organic growth was 3.3% in Q4 and 4.1% for the full year — well below 5% in the quarter, and at the upper half but not the top of the raised 3.5–4.5% range. The reset is the opposite of what the watch contemplated: FY2026 organic is guided to 2–4%, a midpoint below FY2025 actual.

Resolved negatively

2026 carryover EPS contribution from 2025 acquisitions. Management quantified roughly two points of carryover revenue contribution from M&A, primarily in Allegion International. The full EPS bridge wasn't separately quantified, but with adj. EPS guided to $8.70–$8.90 (7–9% growth) and organic decelerating, M&A is doing meaningful work in the bridge.

Resolved positively

Americas adjusted operating margin sustainability. Q4 Americas adj. operating margin came in at 27.1%, down 30bps YoY. Management attributed it in Q&A to a residential volume swing of high-single-digit decline, with price and productivity remaining a dollar tailwind but a 30bps margin headwind.

Resolved negatively

International organic — holding the Q3 +3.6% crossover. International organic was -2.3% in Q4, slipping back into negative territory; full-year International organic was -0.1%. The Q3 crossover did not hold, with weakness in mechanicals more than offsetting electronics strength.

Resolved negatively

Corporate cost run-rate as 2026 starting point. Enterprise adj. operating margin of 22.4% in Q4 and 23.2% full-year provides a baseline, but a discrete corporate run-rate figure was not disclosed in the press release.

Not resolved

What to watch into next quarter

Q1 2026 Americas margin print — management has pre-flagged a tough comp on inflation/investment dynamics; watch whether the GAAP decline matches the "Q1-only" framing or extends into Q2.

Whether residential volume declines moderate or accelerate — Q4 saw high-single-digit declines, management is modeling continued softness, but said Q1 started better. A widening decline would re-rate the Americas margin trajectory.

Organic growth tracking toward 2–4% — watch whether Q1 lands above 3% midpoint, which would suggest the FY2026 guide is sandbagged like FY2025; below 2% would force a downward revision.

M&A bridge disclosure — the per-deal carryover schedule for the 2025 acquisitions has been framed as ~2 points of revenue contribution; expect more granularity on the Q1 call.

International organic ex-acquisitions — Q4 organic was -2.3%; watch the Q1 split to see whether electronics-led growth can pull the segment back toward flat.

FY2026 effective tax rate stepping up to 18–19% from FY2025's 17.6% — embedded ~$0.10 EPS headwind quantified by management; watch for any commentary that this assumption is conservative.

Sources

Allegion Q4 2025 press release, filed February 17 2026 — https://www.sec.gov/Archives/edgar/data/1579241/000157924126000006/exhibit991-pressreleasedat.htm

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