It has been about a month since the last earnings report for Allison Transmission (ALSN Quick QuoteALSN - Free Report) . Shares have lost about 5.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Allison Transmission due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Allison's Q2 Earnings & Sales Beat, Up Y/Y

Allison posted second-quarter earnings of $1.01 a share, topping the Zacks Consensus Estimate of 92 cents and significantly increasing from the year-ago period’s 20 cents. Higher-than-expected revenues from North America Off-Highway, Outside North America On-Highway and Defense segments led to the outperformance. Quarterly revenues of $603 grew 60% from the comparable year-ago period and surpassed the consensus mark of $594 million.

Segmental Performance

Allison segregates revenues in terms of end markets served, which are as follows:

For the reported quarter, net sales in the North America On-Highway end market soared 84% year over year to $302 million, thanks to persistent recovery in global on-highway customer demand from the pandemic-related woes witnessed in the corresponding quarter of 2020. Nonetheless, the metric missed the Zacks Consensus Estimate of $314 million.

For the April-June period, net sales in the North America Off-Highway end market jumped to $9 million from $3 million recorded in the year-ago period. The metric also surpassed the Zacks Consensus Estimate of $4.03 million.

For the second quarter, net sales in the Defense end market rose 14% year over year to $48 million on higher tracked vehicle demand. Further, the figure surpassed the consensus estimate of $45.05 million.

The Outside North America On-Highway end market’s net sales surged 63% year on year to $98 million for the June-end quarter. The metric also topped the consensus mark of $84 million.

Net sales in the Outside North America Off-Highway end market contracted 5% year on year to $18 million and missed the consensus mark of $19.93 million.

Net sales in the Service Parts, Support Equipment & Other end market rose 44% year on year to $128 million for the reported quarter, owing to higher demand for North America service parts as well as support equipment. Nonetheless, the figure fell short of the consensus mark of $134 million.

Financial Position & ’21 View

Allison had cash and cash equivalents of $238 million on Jun 30, 2021 compared with $310 million as of 2020-end. As of Jun 30, long-term debt was $2,505 million, essentially unchanged from the 2020-end level. Adjusted free cash flow for the reported quarter was $95 million, up from the prior-year quarter’s $67 million.

The company reiterated its full-year guidance. Allison projects net sales in the band of $2,325-$2,475 million. Net income and adjusted EBITDA are now envisioned in the band of $395-$465 million and $795-$885 million, respectively. Adjusted free cash flow is expected within $415-$475 million for 2021. Capex is projected between $170 million and $180 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, Allison Transmission has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Allison Transmission has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.