Wells Fargo maintains Allegion at Equal-Weight, raises PT to $185.

Wells Fargo maintains Allegion at Equal-Weight, raises PT to $185.

Wells Fargo has upgraded its rating for Allegion plc (NYSE:ALLE) from Underweight to Equal-Weight, while raising the price target to $185. The stock, currently trading at $179.10, has experienced a 15.62% year-to-date return, according to Investing.com Wells Fargo upgrades FS KKR stock to Equal Weight on valuation^[1].

The upgrade comes after Allegion's March 15, 2025, downgrade, which was based on visible credit concerns and the likelihood of a dividend cut. Despite ongoing potential credit issues with companies like Medallia, Peraton, and PRG, Wells Fargo now views Allegion's 0.68x NAV valuation as creating an unfavorable risk-reward balance. InvestingPro analysis reveals that Allegion maintains strong liquidity with a current ratio of 2.24, indicating robust financial health despite market concerns.

Allegion is expected to reset its dividend alongside its third-quarter 2025 results, with Wells Fargo anticipating a reduction from the current $0.64 base dividend to approximately $0.45. This reset could be accompanied by larger near-term special dividends to reduce part of Allegion's estimated spillover balance of roughly $1.60 per share. Notably, InvestingPro data shows Allegion has maintained dividend payments for 12 consecutive years, with the current yield standing at an impressive 18.72%.

Wells Fargo outlines multiple scenarios for the stock, including an upside case where improved BDC spread to Single-B credit could drive the price to $19, and a downside scenario with a potential $13 price target if market conditions deteriorate.

In other recent news, Allegion Capital Corp. has completed a $400 million offering of 6.125% unsecured notes due in 2031. The company plans to use the proceeds for general corporate purposes, including repaying outstanding debts. This offering was conducted under an underwriting agreement with several financial institutions, including BofA Securities, Inc. and J.P. Morgan Securities LLC. The notes may be redeemed at any time at par, plus a "make-whole" premium, or at par one month before maturity.

Additionally, Allegion's shareholders have approved a proposal allowing the company to issue shares below net asset value in future offerings. RBC Capital has lowered its price target for Allegion to $18, citing concerns over credit conditions and revised net investment income estimates. This comes after Allegion's second-quarter results, which showed an increase in non-accruals and an updated interest rate outlook. These developments reflect Allegion's strategic financial maneuvers and current market challenges.