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Allison (ALSN) Invests in Vehicle Test Center in Indianapolis

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Allison Transmission Holdings, Inc. (ALSN - Free Report) is making an investment to build a vehicle testing facility in Indianapolis, IN. The new facility will be sited within the campus of the company’s global headquarters on the westside of Indianapolis.

This new vehicle environmental testing center will allow Allison to test replicating vehicle environments and duty cycles. Testing will also aid the company to offer products for highly specialized vehicles that can perform under severe weather conditions. Further, the testing center can be utilized by third parties to test their products in times when not used by Allison.

Planning for construction of the testing facility has already started and is scheduled to be completed in 2020. It will consist of two environmental chambers that will simulate extreme temperature, altitude and on-road conditions. The simulation will help in assessing on-board diagnostic development, regulatory compliance and performance improvements for vehicle functional optimization.

Allison Transmission Holdings, Inc. Price and Consensus

 

Additionally, the facility will support testing of a wide range of propulsion systems, including conventional powertrains, alternative fuel, electric hybrid and fully-electric vehicles. The center, which is one of a few in the United States, will support the industry’s move toward innovation.

Strong cash flow allows Allison to invest in the development of the test center in Indianapolis. In 2018, the company’s adjusted free cash flow was $737 million compared with $567 million in the prior year. For 2019, it expects the figure to be $550-$600 million.

Last month, Allison announced results for fourth-quarter 2018. In the quarter, its earnings were $1.14 per share, which surpassed the Zacks Consensus Estimate. Further, net sales rose 10% year over year to $647 million, which also beat estimates.

For the current year, growth initiatives along with strong demand in the North America On-Highway end market and price increase of certain products are expected to be the major drivers for Allison’s financials. It projects net sales of $2.58-$2.68 billion and net income of $535-$585 million.

Zacks Rank & Stocks to Consider

Allison currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader auto sector are Honda Motor Co., Ltd. (HMC - Free Report) , Valeo S.A. (VLEEY - Free Report) and Oshkosh Corporation (OSK - Free Report) . Honda and Valeo currently carry a Zacks Rank #2 (Buy) while Oshkosh sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Honda has expected long-term growth rate of 2.9%. The Zacks Consensus Estimate for the company’s earnings for fiscal 2019 has been revised 4.3% upward over the past 30 days.

Valeo has expected long-term growth rate of 0.5%. The Zacks Consensus Estimate for the company’s earnings for 2019 has been revised 0.6% upward over the past 30 days.

Oshkosh has expected long-term growth rate of 11.3%. The Zacks Consensus Estimate for the company’s earnings for fiscal 2019 has been revised 14.1% upward over the past 30 days.

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