Evercore ISI initiated coverage on Allegion (NYSE: ALLE) with an Outperform rating and a $175.00 price target, highlighting the company’s strong long-term growth profile and margin resilience.
The firm described Allegion as a high-quality compounder with a differentiated go-to-market strategy, consistent margin performance, and strong free cash flow generation among the highest in its coverage universe.
Evercore noted that the company benefits from pricing power and sees potential for organic growth to reaccelerate in the coming years. While residential market weakness has weighed on sentiment, the firm believes this concern is already reflected in the stock’s valuation, which is trading at multi-year lows relative to both construction and international peers such as ASSA.
The firm outlined three key reasons for its positive view: first, growth returning toward historical averages, with long-term volume trends expected to recover despite recent residential weakness; second, consistent margin expansion and resilience across economic cycles, with industry-leading gross margins and strong incremental margins; and third, superior free cash flow margins and conversion, with conversion exceeding 100% of net income over the cycle.
Despite these strengths, Allegion is currently trading at a 7% free cash flow yield for 2027–2028 estimates, compared to peers at 4% to 5%.
