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Why Is Allison Transmission (ALSN) Up 7.8% 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 added about 7.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Allison Transmission due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Allison Q3 Earnings and Sales Top
Allison Transmission posted third-quarter earnings of $1.45 a share, which topped the Zacks Consensus Estimate of $1.31 owing to higher-than-anticipated sales from North America Off-Highway, Outside North America On-Highway, Outside North America Off-Highway and Service Parts, Support Equipment & Other end markets. The bottom line increased 63% on a year-over-year basis from 89 cents a share. Quarterly revenues of $710 million grew 25% from the year-ago period and crossed the consensus mark of $691 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 24% 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 $356 million.
Net sales in the North America Off-Highway end market rose 20% to $24 million from the year-ago period and crossed the Zacks Consensus Estimate of $22.4 million.
In the reported quarter, net sales in the Defense end market declined 10% year over year to $35 million. The figure also lagged the consensus estimate of $39.65 million
The Outside North America On-Highway end market’s net sales rose 27% year over year to $118 million in the quarter, led by improved demand in Europe, Asia and South America and outpaced the consensus mark of $109 million.
Net sales in the Outside North America Off-Highway end market shot up 157% year over year to $36 million and beat the consensus mark of $24.37 million.
Net sales in the Service Parts, Support Equipment & Other end market rose 25% year over year to $157 million in the quarter, owing to higher demand for global service parts and support equipment, and aluminum die-cast components. Moreover, the figure crossed the consensus mark of $139 million.
Financial Position
Allison saw a gross profit of $328 million, a 26% increase from $261 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 $245 million, an increase of nearly 30% from $189 million a year ago. The growth was led by higher gross profit.
Allison had cash and cash equivalents of $180 million on Sep 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 $182 million, an increase from $153 million a year ago due to lower capital expenditures and higher net cash provided by operating activities.
Net cash provided by operating activities increased to $207 million from $196 million for the same period in 2021 on higher gross profit.
Selling, general and administrative expenses in the quarter increased to $78 million from $73 million for the same period in 2021, driven by higher commercial activities spending. Engineering – research and development expenses were $47 million, an increase from $42 million on a year-over-year basis, primarily led by increased product initiatives spending.
In the third quarter, Allison repurchased $109 million of its common stock. It paid a quarterly dividend of 21 cents per share.
2022 Outlook
Allison raised its full-year 2022 guidance midpoints and narrowed ranges. Its estimated net sales are now in the band of $2,690-$2,740 million instead of the prior range of $2,650-$2,750 million. Net income is now expected in the band of $490-$510 million, up from the prior estimate of $450-$500 million, and adjusted EBITDA is now estimated within $915-$945 million from $885-$955 million. Adjusted free cash flow is now estimated within $460-$480 million from $420-$480 million projected previously. Its expected net cash provided by operating activities is within $620-$650 million, up from $590-$660 million.
Capex numbers are in the band of $160-$170 million, slightly down from $170-$180 million. 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Allison Transmission has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Allison Transmission has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Allison Transmission is part of the Zacks Automotive - Original Equipment industry. Over the past month, Autoliv, Inc. (ALV - Free Report) , a stock from the same industry, has gained 9.2%. The company reported its results for the quarter ended September 2022 more than a month ago.
Autoliv, Inc. reported revenues of $2.3 billion in the last reported quarter, representing a year-over-year change of +24.6%. EPS of $1.23 for the same period compares with $0.73 a year ago.
For the current quarter, Autoliv, Inc. is expected to post earnings of $1.63 per share, indicating a change of +25.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.9% over the last 30 days.
Autoliv, Inc. has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Why Is Allison Transmission (ALSN) Up 7.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Allison Transmission (ALSN - Free Report) . Shares have added about 7.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Allison Transmission due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Allison Q3 Earnings and Sales Top
Allison Transmission posted third-quarter earnings of $1.45 a share, which topped the Zacks Consensus Estimate of $1.31 owing to higher-than-anticipated sales from North America Off-Highway, Outside North America On-Highway, Outside North America Off-Highway and Service Parts, Support Equipment & Other end markets. The bottom line increased 63% on a year-over-year basis from 89 cents a share. Quarterly revenues of $710 million grew 25% from the year-ago period and crossed the consensus mark of $691 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 24% 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 $356 million.
Net sales in the North America Off-Highway end market rose 20% to $24 million from the year-ago period and crossed the Zacks Consensus Estimate of $22.4 million.
In the reported quarter, net sales in the Defense end market declined 10% year over year to $35 million. The figure also lagged the consensus estimate of $39.65 million
The Outside North America On-Highway end market’s net sales rose 27% year over year to $118 million in the quarter, led by improved demand in Europe, Asia and South America and outpaced the consensus mark of $109 million.
Net sales in the Outside North America Off-Highway end market shot up 157% year over year to $36 million and beat the consensus mark of $24.37 million.
Net sales in the Service Parts, Support Equipment & Other end market rose 25% year over year to $157 million in the quarter, owing to higher demand for global service parts and support equipment, and aluminum die-cast components. Moreover, the figure crossed the consensus mark of $139 million.
Financial Position
Allison saw a gross profit of $328 million, a 26% increase from $261 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 $245 million, an increase of nearly 30% from $189 million a year ago. The growth was led by higher gross profit.
Allison had cash and cash equivalents of $180 million on Sep 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 $182 million, an increase from $153 million a year ago due to lower capital expenditures and higher net cash provided by operating activities.
Net cash provided by operating activities increased to $207 million from $196 million for the same period in 2021 on higher gross profit.
Selling, general and administrative expenses in the quarter increased to $78 million from $73 million for the same period in 2021, driven by higher commercial activities spending. Engineering – research and development expenses were $47 million, an increase from $42 million on a year-over-year basis, primarily led by increased product initiatives spending.
In the third quarter, Allison repurchased $109 million of its common stock. It paid a quarterly dividend of 21 cents per share.
2022 Outlook
Allison raised its full-year 2022 guidance midpoints and narrowed ranges. Its estimated net sales are now in the band of $2,690-$2,740 million instead of the prior range of $2,650-$2,750 million. Net income is now expected in the band of $490-$510 million, up from the prior estimate of $450-$500 million, and adjusted EBITDA is now estimated within $915-$945 million from $885-$955 million. Adjusted free cash flow is now estimated within $460-$480 million from $420-$480 million projected previously. Its expected net cash provided by operating activities is within $620-$650 million, up from $590-$660 million.
Capex numbers are in the band of $160-$170 million, slightly down from $170-$180 million. 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Allison Transmission has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Allison Transmission has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Allison Transmission is part of the Zacks Automotive - Original Equipment industry. Over the past month, Autoliv, Inc. (ALV - Free Report) , a stock from the same industry, has gained 9.2%. The company reported its results for the quarter ended September 2022 more than a month ago.
Autoliv, Inc. reported revenues of $2.3 billion in the last reported quarter, representing a year-over-year change of +24.6%. EPS of $1.23 for the same period compares with $0.73 a year ago.
For the current quarter, Autoliv, Inc. is expected to post earnings of $1.63 per share, indicating a change of +25.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.9% over the last 30 days.
Autoliv, Inc. has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.