Allison Transmission Holdings (NYSE: ALSN ) may not garner the same level of recognition compared to technology giants, but its engineering works are critical to the streamlined transportation of goods, military assets and people across the globe.Volatility and Reason (V&R) is a space for clear-headed market commentary. No hot takes, no blind optimism, and no empty noise. I explore business, economics, and investing with a simple principle: logic over sentiment, curiosity over distraction.My goal? To cut th ...

Group 1 - The company anticipates continued growth and claims to be mostly insulated from external effects [1] - Robert F. Abbott has been managing investments since 1995 and has incorporated options strategies since 2010 [1] Group 2 - No stock or derivative positions are held by the analyst in the companies mentioned [2] - The article reflects the author's opinions and is not influenced by compensation [2]

INDIANAPOLIS, May 7, 2025 /PRNewswire/ -- Allison Transmission Holdings Inc. (NYSE: ALSN) today announced that its Board of Directors has declared a cash dividend of $0.27 per share on the Company's common stock for the second quarter of 2025. Payment will be made on May 30, 2025, to stockholders of record at the close of business on May 19, 2025.The payment of any future dividends will be at the discretion of the Board of Directors and will be dependent upon Allison Transmission's financial position, resul ...

Allison Transmission Holdings (ALSN) delivered first-quarter 2024 earnings of $2.23 per share, which beat the Zacks Consensus Estimate of $1.97 and rose 17% year over year. Quarterly revenues of $766 million fell 3% from the year-ago period's level and fell short of the Zacks Consensus Estimate of $775 million.Segmental PerformanceAllison Transmission segregates revenues in terms of end markets served, which are as follows:In the reported quarter, net sales in the North America On-Highway end market rose 3. ...

Financial Performance - Net sales for the first quarter of 2025 were $766 million, a decrease of 3% compared to $789 million in the first quarter of 2024[105] - Gross profit for the first quarter of 2025 was $378 million, an increase of 3% from $366 million in the same period of 2024, with gross profit as a percentage of net sales rising to 49%[107] - Adjusted EBITDA for the first quarter of 2025 was $287 million, representing 37.5% of net sales, compared to $289 million and 36.6% in the first quarter of 2024[101] - Net income for the first quarter of 2025 was $192 million, or 25.1% of net sales, compared to $169 million, or 21.4% in the first quarter of 2024[104] - Adjusted free cash flow for Q1 2025 was $155 million, down from $162 million in Q1 2024[101] Market Performance - North America On-Highway end market net sales increased by 4% to $435 million, driven by price increases and strong demand for Class 8 vocational trucks[92] - Global Off-Highway end market net sales decreased by 61% to $18 million, primarily due to lower demand from the energy, mining, and construction sectors outside of North America[92] - The company expects higher net sales in 2025, driven by price increases and increased demand in the Defense end market[91] Expenses and Costs - Engineering expenses decreased by 7% to $43 million in the first quarter of 2025, down from $46 million in the same period of 2024[109] - Interest expense decreased by 16% to $21 million in the first quarter of 2025, primarily due to lower variable interest rates on the Term Loan[110] - Direct material costs accounted for approximately 66% of the cost of sales for the three months ended March 31, 2025[132] Cash Flow and Liquidity - Cash flows provided by operating activities for the three months ended March 31, 2025, were $181 million, compared to $173 million for the same period in 2024, reflecting a year-over-year increase of approximately 4.6%[124] - Cash used for investing activities increased to $26 million for the three months ended March 31, 2025, from $12 million in the same period of 2024, primarily due to a $15 million increase in capital expenditures[125] - Cash used for financing activities was $184 million for the three months ended March 31, 2025, compared to $164 million in 2024, driven by $98 million higher stock repurchases[126] - As of March 31, 2025, the company had total available cash and cash equivalents of $753 million, a decrease from $781 million as of December 31, 2024[114] - The company had $744 million available under the Revolving Credit Facility as of March 31, 2025, with no amounts outstanding[119] Debt and Taxation - As of March 31, 2025, the company had $513 million of indebtedness associated with its Term Loan and $1,000 million associated with its 3.75% Senior Notes due January 2031[117] - The effective tax rate for the first quarter of 2025 was 18%, compared to 17% in the same period of 2024, driven by higher taxable income[112] - The company recorded a deferred tax liability of $3 million for its subsidiary in China, with no other deferred tax liabilities recognized for foreign subsidiaries[116] Stock Repurchase and Shareholder Returns - The company repurchased $154 million of its common stock under the Repurchase Program during the three months ended March 31, 2025, with approximately $1,366 million remaining available under the program[121] - The first lien net leverage ratio was (0.21x) as of March 31, 2025, indicating strong liquidity management[119] Risks and Future Outlook - The company is subject to various legal actions and administrative proceedings, which may impact future financial performance[127] - The company faces numerous risks, including competitive market conditions and potential disruptions in supply chains[130] - The company anticipates that its cash flows and liquidity will be sufficient to meet known and anticipated cash requirements for the next twelve months[123] - The company is focused on technological developments, including electric hybrid and fully electric commercial vehicles, to meet changing customer needs[130]

Core Insights - Allison Transmission reported $766 million in revenue for Q1 2025, a year-over-year decline of 2.9% [1] - The EPS for the same period was $2.23, up from $1.90 a year ago, representing a surprise of +13.20% over the consensus estimate of $1.97 [1] Financial Performance - Revenue was below the Zacks Consensus Estimate of $775.11 million, resulting in a surprise of -1.18% [1] - The stock has returned -6.7% over the past month, compared to the Zacks S&P 500 composite's -0.7% change, indicating underperformance [3] Net Sales by End Market - North America On-Highway: $435 million, exceeding the average estimate of $406.42 million, with a year-over-year increase of +3.6% [4] - Service Parts, Support Equipment & Other: $148 million, below the estimated $159.20 million, reflecting a year-over-year decline of -7.5% [4] - Defense: $53 million, slightly below the average estimate of $53.76 million, but showing a year-over-year increase of +10.4% [4] - Outside North America On-Highway: $112 million, below the average estimate of $116.73 million, with a year-over-year decline of -2.6% [4]

Company Performance - Allison Transmission reported quarterly earnings of $2.23 per share, exceeding the Zacks Consensus Estimate of $1.97 per share, and up from $1.90 per share a year ago, representing an earnings surprise of 13.20% [1] - The company posted revenues of $766 million for the quarter ended March 2025, which missed the Zacks Consensus Estimate by 1.18% and decreased from $789 million year-over-year [2] - Over the last four quarters, Allison Transmission has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $2.12 on revenues of $794.34 million, and for the current fiscal year, it is $8.29 on revenues of $3.15 billion [7] - The estimate revisions trend for Allison Transmission is mixed, leading to a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Automotive - Original Equipment industry, to which Allison Transmission belongs, is currently in the bottom 30% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Allison Transmission's stock performance [5]

Allison Transmission (ALSN) Q1 2025 Earnings Call May 01, 2025 05:00 PM ET Company Participants Jacalyn Bolles - Executive Director of Treasury & IRDavid Graziosi - Chairman and CEOScott Mell - CFO & TreasurerG. Frederick Bohley - COOIsaac Sellhausen - Director - Equity ResearchTami Zakaria - Executive Director Conference Call Participants Kyle Menges - Vice President & Equity Research AnalystTim Thein - Managing Director & Research AnalystRob Wertheimer - AnalystAngel Castillo - AnalystLuke Junk - Senior R ...

Financial Data and Key Metrics Changes - Year-over-year net sales decreased by 3% to $766 million, driven by a 4% increase in the North American on-highway end market and a 10% increase in the defense end market [15][16] - Gross profit for the quarter was $378 million, an increase of $12 million from $366 million in the same period in 2024, primarily due to price increases on certain products [16] - Net income increased by $23 million to $192 million, with diluted earnings per share rising 17% year-over-year to $2.23 [16][18] - Adjusted EBITDA margin increased by 90 basis points year-over-year to 37.5% [17] Business Line Data and Key Metrics Changes - North American on-highway end market sales were driven by price increases and strength in Class 8 vocational trucks, partially offset by lower demand for medium-duty trucks [15] - The defense end market saw a 10% increase in net sales, primarily due to price increases [15] Market Data and Key Metrics Changes - The company noted ongoing geopolitical tensions and shifting policies creating uncertainty across end markets, but emphasized its strategic advantages in tolerating the current environment [12] - Over 85% of direct material spend is with North American suppliers, minimizing exposure to global trade uncertainties [12] Company Strategy and Development Direction - The company is focused on expanding its global service network and enhancing service capabilities in key regions, particularly in Japan and West Africa [11] - The selection of Allison's 3040MX transmission for India's Future Infantry Combat Vehicle program represents a significant growth opportunity in the international defense market [10] - The company is committed to maintaining strong financial performance while focusing on growth initiatives and operational efficiency [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate current market dynamics and maintain strong financial performance [12] - The company reaffirmed its full-year 2025 guidance, expecting net sales between $3.2 billion and $3.3 billion, and net income between $735 million and $785 million [19] Other Important Information - The company announced a $1 billion increase in its stock repurchase program and repurchased over $150 million of common stock in the first quarter [18] - The quarterly dividend has increased over 80% since 2019, reflecting the company's commitment to shareholder-friendly capital allocation [18] Q&A Session Summary Question: Can you unpack the margin performance in the quarter? - Management noted that gross margins increased from 46.4% to 49.3%, driven by price increases and the absence of one-time UAW signing incentives from the previous year [22][24] Question: What are the dynamics in the vocational demand environment? - Management indicated that the North American vocational market remains robust, with significant demand for their products, particularly from municipalities [28][30] Question: How is the company thinking about capital allocation, especially regarding M&A? - Management emphasized a focus on organic growth and shareholder returns, while remaining open to potential M&A opportunities [35][39] Question: What is the company's position regarding the truck supply chain and tariffs? - Management expressed confidence in their localized supply chain and ability to offset tariff impacts, while monitoring ongoing investigations [41][43] Question: What are the implications of the EPA regulations on the business? - Management stated that their products do not require significant modifications to comply with new emissions regulations, positioning them well in the market [55][57] Question: Can you comment on the step down in the parts business? - Management noted general weakness in global service parts but attributed it to a normalization after two strong years, with no specific issues highlighted [62]

Safe Harbor Statement The following information contains, or may be deemed to contain, "forward-looking statements" (as defined in the U.S. Private Securities Litigation Reform Act of 1995). The words "believe," "expect," "anticipate," "intend," "estimate" and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Although forward- ...