Analyzing Lennox International (NYSE:LII) and Allegion (NYSE:ALLE)

Lennox International (NYSE:LII) and Allegion (NYSE:ALLE) are both large-cap industrials companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, profitability, risk, analyst recommendations, institutional ownership, dividends and earnings.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Lennox International and Allegion, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lennox International	2	11	3	0	2.06
Allegion	0	4	5	0	2.56

Lennox International presently has a consensus target price of $444.85, indicating a potential upside of 29.28%. Allegion has a consensus target price of $179.60, indicating a potential downside of 3.74%. Given Lennox International’s higher probable upside, research analysts plainly believe Lennox International is more favorable than Allegion.

Dividends

Lennox International pays an annual dividend of $5.44 per share and has a dividend yield of 1.6%. Allegion pays an annual dividend of $2.20 per share and has a dividend yield of 1.2%. Lennox International pays out 25.2% of its earnings in the form of a dividend. Allegion pays out 27.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Lennox International has increased its dividend for 16 consecutive years and Allegion has increased its dividend for 11 consecutive years. Lennox International is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

67.1% of Lennox International shares are owned by institutional investors. Comparatively, 92.2% of Allegion shares are owned by institutional investors. 9.8% of Lennox International shares are owned by company insiders. Comparatively, 0.6% of Allegion shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Lennox International and Allegion”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Lennox International	$5.20 billion	2.27	$805.80 million	$21.55	15.97
Allegion	$4.07 billion	3.87	$643.80 million	$8.03	23.24

Lennox International has higher revenue and earnings than Allegion. Lennox International is trading at a lower price-to-earnings ratio than Allegion, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Lennox International has a beta of 1.16, indicating that its share price is 16% more volatile than the S&P 500. Comparatively, Allegion has a beta of 0.81, indicating that its share price is 19% less volatile than the S&P 500.

Profitability

This table compares Lennox International and Allegion’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Lennox International	13.77%	62.34%	17.67%
Allegion	15.74%	35.52%	14.06%

Summary

Lennox International beats Allegion on 11 of the 17 factors compared between the two stocks.

About Lennox International

Lennox International Inc., together with its subsidiaries, designs, manufactures, and markets a range of products for the heating, ventilation, air conditioning, and refrigeration markets in the United States, Canada, and internationally. The Home Comfort Solutions segment provides furnaces, air conditioners, heat pumps, packaged heating and cooling systems, indoor air quality equipment, comfort control products, and replacement parts and supplies; residential heating, ventilation, cooling equipment, and air conditioning; and evaporator coils and unit heaters under Lennox, Dave Lennox Signature Collection, Armstrong Air, Ducane, AirEase, Concord, MagicPak, Advanced Distributor Products, Allied, Elite Series, Merit Series, Comfort Sync, Healthy Climate, iComfort, ComfortSense, and Lennox Stores name. The Building Climate Solutions segment offers unitary heating and air conditioning equipment, applied systems, controls, installation and service of commercial heating and cooling equipment, variable refrigerant flow commercial, curb, curb adapters, drop box diffusers, HVAC recycling, and salvage service. This segment also provides condensing units, unit coolers, fluid coolers, air cooled condensers, air handlers, and refrigeration rack systems for preserving food and other perishables; and compressor racks and industrial process chillers under the Lennox, Model L, CORE, Enlight, Xion, Energence, Prodigy, Strategos, Raider, Lennox VRF, Lennox National Account Services, Allied Commercial, Elite, AES Industries, Mechanical, and Reclaim, Heatcraft Worldwide and Chandler Refrigeration, Bohn, MAGNA, Larkin, FriguaBohn, IntelliGen, and Interlink brand name. In addition, the company provides small package units, rooftop units, chillers, air handlers, and fan coils. It sells its products and services through direct sales, distributors, and company-owned parts and supplies stores. The company was founded in 1895 and is headquartered in Richardson, Texas.

About Allegion

Allegion plc manufactures and sells mechanical and electronic security products and solutions worldwide. The company offers door controls and systems and exit devices; locks, locksets, portable locks, and key systems and services; electronic security products and access control systems; time, attendance, and workforce productivity systems; doors, accessories, and other. It also provides services and software, which includes inspection, maintenance, and repair services for its automatic entrance solutions; and software as a service, including access control, IoT integration, and workforce management solutions, as well as aftermarket services, design and installation offerings, and locksmith services. The company sells its products and solutions to end-users in commercial, institutional, and residential facilities, including education, healthcare, government, hospitality, retail, commercial office, and single and multi-family residential markets under the CISA, Interflex, LCN, Schlage, SimonsVoss, and Von Duprin brands. It sells its products and solutions through distribution and retail channels, such as specialty distribution, e-commerce, and wholesalers, as well as through various retail channels comprising do-it-yourself home improvement centers, online and e-commerce platforms, and small specialty showroom outlets. Allegion plc was incorporated in 2013 and is headquartered in Dublin, Ireland.