Allegion downgraded to Equal Weight at Barclays

Allegion (NYSE:ALLE) on Monday was downgraded to Equal Weight from a previous investment rating of Overweight by analysts at financial-services company Barclays. They said the provider of security products faces slower growth in nonresidential construction.

“The market tends to view Allegion (ALLE) as a pure U.S. non-residential buildings play, and our cautious view on the U.S. non-residential buildings market means that it will likely be tough for the stock to work,” Julian Mitchell, analyst at Barclays, said in a December 4 report.

Barclays cut its price target for Allegion (ALLE) to $119 a share from $130 a share previously, based on several valuation methods including discounted cash flow, enterprise value-to-ebitda, free cash flow yield and earnings per share.

The report said that Allegion (ALLE) may not benefit from acquiring other businesses, such as Carrier’s (NYSE:CARR) security unit. Barclays forecasts that Carrier Global (CARR) will sell the business in the first half of 2024.

“We are not sure though that if Allegion (ALLE) were to buy [Carrier Fire & Security], it would be received well by investors,” according to Barclays, “as Carrier (CARR) is expecting to receive a high valuation for the business, implying any buyer may have to pay a ‘full’ acquisition price, Allegion (ALLE) might need to issue equity for the transaction and if Allegion (ALLE) did not issue equity, it would likely have high balance sheet leverage.”

Barclays upgraded 3M (MMM) to Equal Weight.