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Why Is Allison Transmission (ALSN) Down 3.4% Since Last Earnings Report?
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A month has gone by since the last earnings report for Allison Transmission (ALSN - Free Report) . Shares have lost about 3.4% 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 Q4 Earnings and Sales Grow Y/Y
Allison posted fourth-quarter earnings of $1.15 a share, which beat the Zacks Consensus Estimate of 92 cents owing to higher-than-anticipated contribution from all segments except the North America On-Highway end market. The bottom line also increased 117% on a year-over-year basis. Quarterly revenues of $644 million grew 20.4% from the year-ago period and surpassed the consensus mark of $596.9 million.
Segmental Performance
Allison 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 inched down 1% year over year to $281 million amid lower demand owing to supply disruptions and raw material constraints. The metric also missed the Zacks Consensus Estimate of $294 million.
Net sales in the North America Off-Highway end market skyrocketed to $27 million from $1 million recorded in the year-ago period on higher demand for hydraulic fracturing applications. The metric also surpassed the Zacks Consensus Estimate of $16.5 million.
In the fourth quarter, net sales in the Defense end market expanded 23% year over year to $54 million. The figure also topped the consensus estimate of $41.8 million.
The Outside North America On-Highway end market’s net sales surged 38% year over year to $106 million in the quarter, courtesy of growth initiatives and recovery of customer demand from pandemic-related disruptions in the corresponding period of 2020. The metric also beat the consensus mark of $93 million.
Net sales in the Outside North America Off-Highway end market skyrocketed 218% year over year to $35 million on higher demand from energy, mining and construction sectors. The metric outpaced the consensus mark of $16.93 million.
Net sales in the Service Parts, Support Equipment & Other end market rose 19% year over year to $141 million in the quarter owing to higher demand for global service parts and support equipment. Moreover, the figure crossed the consensus mark of $134 million.
Financial Position
Allison had cash and cash equivalents of $127 million on Dec 31, 2021, compared with $310 million as of 2020-end. Long-term debt was $2,504 million, marginally down from $2,507 million. Adjusted free cash flow in the reported quarter was $105 million, down from the prior-year quarter’s $128 million on increased capital expenditures.
Selling, general and administrative expenses fell marginally to $79 million from $80 million. Engineering – research and development expenses in the quarter increased to $50 million from $40 million in the year-ago quarter, primarily driven by increased product initiatives spending.
In 2021, the company settled more than $500 million of share repurchases, representing 12% of shares outstanding as of Dec 31, 2020.
2022 Outlook
For 2022, Allison projects net sales in the band of $2,625-$2,775 million. Net income and adjusted EBITDA are envisioned in the band of $430-$520 million and $865-$975 million, respectively. Adjusted free cash flow is expected within $400-$500 million. ALSN expects to generate $570-$680 million in net cash provided by operating activities. Capex is forecast in the band of $170-$180 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Allison Transmission has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Allison Transmission has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Allison Transmission (ALSN) Down 3.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Allison Transmission (ALSN - Free Report) . Shares have lost about 3.4% 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 Q4 Earnings and Sales Grow Y/Y
Allison posted fourth-quarter earnings of $1.15 a share, which beat the Zacks Consensus Estimate of 92 cents owing to higher-than-anticipated contribution from all segments except the North America On-Highway end market. The bottom line also increased 117% on a year-over-year basis. Quarterly revenues of $644 million grew 20.4% from the year-ago period and surpassed the consensus mark of $596.9 million.
Segmental Performance
Allison 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 inched down 1% year over year to $281 million amid lower demand owing to supply disruptions and raw material constraints. The metric also missed the Zacks Consensus Estimate of $294 million.
Net sales in the North America Off-Highway end market skyrocketed to $27 million from $1 million recorded in the year-ago period on higher demand for hydraulic fracturing applications. The metric also surpassed the Zacks Consensus Estimate of $16.5 million.
In the fourth quarter, net sales in the Defense end market expanded 23% year over year to $54 million. The figure also topped the consensus estimate of $41.8 million.
The Outside North America On-Highway end market’s net sales surged 38% year over year to $106 million in the quarter, courtesy of growth initiatives and recovery of customer demand from pandemic-related disruptions in the corresponding period of 2020. The metric also beat the consensus mark of $93 million.
Net sales in the Outside North America Off-Highway end market skyrocketed 218% year over year to $35 million on higher demand from energy, mining and construction sectors. The metric outpaced the consensus mark of $16.93 million.
Net sales in the Service Parts, Support Equipment & Other end market rose 19% year over year to $141 million in the quarter owing to higher demand for global service parts and support equipment. Moreover, the figure crossed the consensus mark of $134 million.
Financial Position
Allison had cash and cash equivalents of $127 million on Dec 31, 2021, compared with $310 million as of 2020-end. Long-term debt was $2,504 million, marginally down from $2,507 million. Adjusted free cash flow in the reported quarter was $105 million, down from the prior-year quarter’s $128 million on increased capital expenditures.
Selling, general and administrative expenses fell marginally to $79 million from $80 million. Engineering – research and development expenses in the quarter increased to $50 million from $40 million in the year-ago quarter, primarily driven by increased product initiatives spending.
In 2021, the company settled more than $500 million of share repurchases, representing 12% of shares outstanding as of Dec 31, 2020.
2022 Outlook
For 2022, Allison projects net sales in the band of $2,625-$2,775 million. Net income and adjusted EBITDA are envisioned in the band of $430-$520 million and $865-$975 million, respectively. Adjusted free cash flow is expected within $400-$500 million. ALSN expects to generate $570-$680 million in net cash provided by operating activities. Capex is forecast in the band of $170-$180 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Allison Transmission has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Allison Transmission has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.