A month has gone by since the last earnings report for Allison Transmission (ALSN Quick QuoteALSN - Free Report) . Shares have lost about 8.8% 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? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent drivers for Allison Transmission Holdings, Inc. before we dive into how investors and analysts have reacted as of late.

ALSN Q1 Earnings Beat Estimates on Off-Highway Additions

Allison reported first-quarter 2026 adjusted earnings of $2.57 per share, which beat the Zacks Consensus Estimate of $2.54 by 1.38% and increased 6% year over year. Quarterly revenues of $1.41 billion rose 84% from the year-ago quarter’s level and topped the Zacks Consensus Estimate of $1.38 billion by 2.15%.

The quarter marked the first to include the Allison Off-Highway business, acquired on Jan. 1, 2026, from Dana Incorporated. Integration efforts are progressing, with approximately $120 million in expected annual cost savings. Adjusted EBITDA margin for the quarter was 26%.

Acquisition-Related Costs Weigh on ALSN’s Profitability

Profitability was impacted by one-time costs tied to the Off-Highway acquisition. Results were weighed down by approximately $76 million in acquisition-related expenses, primarily caused by higher inventory costs and incremental depreciation from revalued assets such as property, plant and equipment.

These factors weighed on the bottom line. Net income was $112 million, with diluted earnings of $1.33 per share. The year-over-year decline in net income was largely attributable to acquisition-related costs and higher interest expenses, partially offset by lower income taxes.

ALSN’s Cost Base Expands With Off-Highway Integration

Operating expenses rose as the company integrated the new business. Selling, general and administrative expenses amounted to $157 million, up $70 million from the prior-year period’s level. The increase was mainly due to the addition of the Off-Highway unit, including $21 million in amortization related to intangible assets and about $17 million in one-time acquisition-related integration costs.

Engineering, research and development expense totaled $54 million, up $12 million year over year. The increase was mainly due to the addition of the Off-Highway business, partly offset by lower spending on product-initiatives in the legacy Allison Transmission unit.

ALSN’s Legacy Transmission Unit Faces Mixed Demand

The legacy Allison Transmission business reported net sales of $733 million, down 4% year over year, mainly due to lower volumes and higher material costs. This was partly offset by price increases on certain products. Segment operating profit amounted to $252 million, representing a strong 34% of net sales.

Within the Transmission unit, results were mixed across different markets. North America on-highway sales totaled $375 million, down 14%, while on-highway sales outside North America amounted to $110 million, down 2%. Global off-highway sales dropped sharply to $8 million, reflecting a decline of 56%. On the positive side, defense sales rose 64% to $87 million. Revenues from service parts, support equipment and other areas increased a modest 3% to $153 million.

Allison’s Off-Highway Mix Boosts Sales, Hits Margins

The newly acquired Allison Off-Highway business generated net sales of $673 million in the quarter. However, profits were affected by higher initial costs and early-stage integration efforts. Gross profit was $50 million, while the unit reported a segment operating loss of $21 million, equal to a negative 3% of net sales.

Off-highway sales were primarily driven by the construction and material handling, totaling $227 million. Agriculture contributed $154 million, while service parts, specialty and other contributed $152 million. Industrial sales totaled $90 million, and mining added $50 million. Demand remained steady in some regions due to ongoing construction activity, while higher mineral prices helped support mining demand.

ALSN’s Cash Flow Supports Deleveraging And Returns

Cash generation remained strong during the quarter. The company generated $156 million in cash from operations and $103 million in adjusted free cash flow. It also used $150 million to repay borrowings under its revolving credit facility during the period.

ALSN ended the quarter with solid liquidity, including $311 million in cash and $845 million available under its revolving credit line. Total debt was $4.29 billion, with net debt of $3.98 billion. The company continues to focus on reducing its debt levels over time, aiming for a net leverage ratio of around 2.0x.

Allison Reaffirms 2026 Outlook

ALSN has reaffirmed its full-year 2026 guidance. Consolidated net sales are expected to be in the range of $5,575-$5,925 million. The Transmission unit sales are projected to be in the $3,025-$3,175 million band. Off-Highway sales are guided to be between $2,550 million and $2,750 million. Net income is expected to be in the range of $600-$750 million. Adjusted EBITDA is anticipated to be in the $1,365-$1,515 million band.

Net cash provided by operating activities is expected to be in the range of $970-$1,100 million. Capital expenditures are projected to be in the band of $295-$315 million. Adjusted free cash flow is now expected to be between $655 million and $805 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 19.28% due to these changes.

VGM Scores

At this time, Allison Transmission has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock has a grade of B on the value side, putting it in the top 40% 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

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Allison Transmission has a Zacks Rank #3 (Hold). We expect an in-line 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, Lear (LEA Quick QuoteLEA - Free Report) , a stock from the same industry, has gained 11.9%. The company reported its results for the quarter ended March 2026 more than a month ago.

Lear reported revenues of $5.82 billion in the last reported quarter, representing a year-over-year change of +4.7%. EPS of $3.87 for the same period compares with $3.12 a year ago.

For the current quarter, Lear is expected to post earnings of $3.84 per share, indicating a change of +10.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +1.2% over the last 30 days.

Lear 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.