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Allison (ALSN) Q2 Earnings & Sales Miss, FY'22 View Modified

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Allison Transmission Holdings (ALSN - Free Report) posted second-quarter earnings of $1.26 a share, which missed the Zacks Consensus Estimate of $1.35 owing to lower-than-anticipated sales from all segments except Outside North America Off-Highway and Service Parts, Support Equipment & Other end markets. The bottom line, however, increased 25% on a year-over-year basis from $1.01 a share. Quarterly revenues of $664 million grew 10% from the year-ago period but lagged the consensus mark of $699 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 jumped 13% year over year to $340 million amid continued robust customer demand for last-mile delivery, regional haul and vocational trucks. But the metric lagged the Zacks Consensus Estimate of $361 million.

Net sales in the North America Off-Highway end market shot up 122% to $20 million from the year-ago period. Yet the metric marginally missed the Zacks Consensus Estimate of $20.25 million.

In the reported quarter, net sales in the Defense end market plummeted 40% year over year to $29 million. The figure also lagged the consensus estimate of $44 million.

The Outside North America On-Highway end market’s net sales rose 7% year over year to $105 million in the quarter, led by improved demand in Europe and South America. The figure, nonetheless, missed the consensus mark of $108 million.

Net sales in the Outside North America Off-Highway end market surged 78% year over year to $32 million and outpaced the consensus mark of $27 million.

Net sales in the Service Parts, Support Equipment & Other end market rose 8% year over year to $138 million in the quarter, owing to higher demand for North America service parts and global support equipment. Moreover, the figure crossed the consensus mark of $136 million.

Financial Position

Allison saw a gross profit of $311 million, an 8% increase from $288 million for the same period in 2021, mainly driven by higher net sales and price increases on certain products.

Adjusted EBITDA in the quarter came in at $227 million, an increase of nearly 6.6% from $213 million a year ago. The increase was led by higher gross profit.

Allison had cash and cash equivalents of $122 million on Jun 30, 2022, down from $127 million as of Dec 31, 2021. Long-term debt was $2,502 million, marginally down from $2,504 million as of Dec 31, 2021. Adjusted free cash flow in the reported quarter was $36 million, down from the prior-year quarter’s $95 million on lower net cash provided by operating activities.

Net cash provided by operating activities sharply decreased to $66 million from $140 million for the same period in 2021 on higher operating working capital funding requirements and higher cash income taxes.

Selling, general and administrative expenses fell to $78 million from $80 million due to lower commercial activities spending. Engineering – research and development expenses in the quarter increased to $46 million from $41 million in the year-ago quarter, primarily driven by higher product initiatives spending.

In the second quarter, Allison settled $34 million of share repurchases. It paid a quarterly dividend of 21 cents per share. As of Jun 30, Allison had repurchased 3% of outstanding shares year to date.

2022 Outlook

Allison modified the guidance for 2022. Its estimated net sales are now in the band of $2,650-$2,750 million compared with $2,625-$2,775 million predicted earlier. Net income is now expected in the band of $450-$500 million, changed from $430-$520 million and adjusted EBITDA is now estimated within $885-$955 million from $865-$975 million. Adjusted free cash flow is now estimated within $420-$480 million from the previous range of $400-$500 million. Its expected net cash provided by operating activities is within $590-$660 million, changed from $570-$680 million. Capex numbers are unchanged in the band of $170-$180 million. However, it reaffirmed that it expects a demand boost in the Global On-Highway, Global Off-Highway and Service Parts, Support Equipment & Other end markets. Its sales guidance also reflects price hikes on certain products.

Zacks Rank & Key Picks

ALSN carries a Zacks Rank #3 (Hold), currently.

Better-ranked players in the auto space include Harley-Davidson (HOG - Free Report) , Genuine Parts Company (GPC - Free Report) and PACCAR Inc. (PCAR - Free Report) , each carrying a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Harley-Davidson has an expected earnings growth rate of 6.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 7% upward in the past 30 days.

Harley-Davidson’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. HOG pulled off a trailing four-quarter earnings surprise of 49.52%, on average. The stock has declined 4.3% in the past year.

Genuine Parts has an expected earnings growth rate of 15% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 1.3% upward in the past 30 days.

Genuine Parts’ earnings beat the Zacks Consensus Estimate in all of the trailing four quarters. GPC pulled off a trailing four-quarter earnings surprise of 11.03%, on average. The stock has risen 21.6% over the past year.

PACCAR has an expected earnings growth rate of 45.3% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 7.4% in the past 30 days.

PACCAR’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. PCAR pulled off a trailing four-quarter earnings surprise of 7.44%, on average. The stock has risen 13.4% in the past year.