Wide-Moat Allegion Boasts Industry-Leading Margins
Allegion, a global leader in security products and solutions, was spun off from Ingersoll-Rand in December 2013. No longer forced to compete for capital from a conglomerate parent, Allegion has employed a more robust acquisition strategy to expand its scale, technological capabilities, and product portfolio. At roughly 80% of sales and 90% of segment profitability, the Americas segment is Allegion's largest and strongest business, with a leading position in locks, exit devices, and door controls. The Americas business has been the key driver of Allegion’s stable, industry-leading profitability, which is a testament to the firm’s market position and pricing power. We expect the Americas business to post mid- to high-single-digit organic growth, on average, over the next five years as the segment capitalizes on the convergence of electronics and mechanical security solutions, and on the increased retrofitting, upgrading, and spending across commercial and residential end markets. The segment’s already strong profit margins should benefit from a mix shift to higher-priced electronics products and operating leverage on increased volume, partially offset by structurally lower profit margins from the acquired access technologies business.