Davidson Kempner and Allegion
Davidson Kempner Capital Management added new positions in Shire Plc (SHPG), Alibaba Group Holding (BABA), and CBS Corporation (CBS). It exited positions in The Walgreen Company (WAG), Yum! Brands, Inc. (YUM), and Starbucks Corporation (SBUX). The fund added to its positions in Signet Jewelers Limited (SIG) and Allegion Plc (ALLE). It lowered its stakes in Lamar Advertising Company (LAMR) and Tiffany & Co. (TIF).
Davidson Kempner added to its position in Allegion Plc (ALLE), which accounted for 0.82% of the fund’s 3Q14 portfolio.
Allegion Plc (ALLE) provides security solutions for homes and businesses, employing more than 8,000 people and selling products in more than 120 countries around the world. Allegion is made up of 25 global brands, including strategic brands Interflex, Schlage, and Von Duprin.
Earnings and revenue beat estimates
Allegion reported third-quarter 2014 net revenues of $546.7 million, up 3.3% compared to the previous year. It also reported net earnings of $62.4 million, or $0.64 per share, from continuing operations. Earnings per share (or EPS) from continuing operations was $0.64, compared to a loss of $0.81 EPS in 3Q13. Adjusted EPS was $0.68, up 41.7% compared to 2013 adjusted EPS of $0.48.
Third-quarter net revenues increased 6.8% on an adjusted basis due to strength in the Americas and Asia-Pacific segments, which offset lower revenues in Europe, Middle East, India, and Africa (or EMEIA).
The Americas segment’s 9% growth was driven by mid-single-digit volume increases in both nonresidential and residential segments. Latin America’s volume was up significantly, primarily due to incremental price realization in Venezuela to offset inflation.
The EMEIA segment revenues were down by 2.8% due to continued market softness, geopolitical uncertainty, and divested businesses in the current year.
Asia-Pacific revenues were up by 6.9% due to volume growth in the North Asia, Australia, and New Zealand regions. The acquisition of FSH Fire & Security Hardware in the second quarter contributed to this growth.
Adjusted net earnings were $65.5 million, or $0.68 per share, from continuing operations, an increase of approximately 42% compared to the previous year. The increase in earnings reflects strong demand in the Americas, continued margin improvement in EMEIA, and a reduction in the effective tax rate.
Allegion’s divested doors and services businesses
On September 1, 2014, Allegion completed the sale of its UK-based door businesses to an affiliate of Alcyon Financial Limited, a financial investment firm. The businesses Allegion sold include the Dor-o-Matic branded automatic door business, the Martin Roberts branded performance steel door business, and the UK service organization. This deal will help Allegion focus on its key strategic businesses and services that can be leveraged across the EMEIA region.
Outlook for 2014
For fiscal year 2014, Allegion expects revenues to be up by approximately 4.5%. In the Americas, it expects high single-digit residential revenue growth and strong Venezuelan growth driven by pricing actions. The nonresidential segment will see modest revenue growth as institutional market recovery continues at a very slow pace.
For Europe, revenue growth is forecast to be negative because of ongoing geopolitical uncertainty and market softness. Adjusted EPS are forecast to be in the range of $2.37 to $2.42, an increase of 10% to 12% from 2013’s adjusted earnings per share. This is driven by operational improvements, European actions, and a reduction in the effective tax rate while investing and positioning the company for future growth.