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Allison (ALSN) Rides on Favorable Demand Amid Cost Woes

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We issued an updated research report on Allison Transmission Holdings, Inc. (ALSN - Free Report) on Mar 6.

In fourth-quarter 2018, Allison’s earnings surpassed the Zacks Consensus Estimate. During the quarter, the company’s net sales rose 10% year over year to $647 million and outpaced the Zacks Consensus Estimate.

Favorable demand outside North America Off-Highway and On-Highway end markets are aiding sales growth for the company. For 2019, Allison anticipates net sales of $2.58-$2.68 billion. Net income is estimated to be $535-$585 million and adjusted EBITDA is likely to be $1-$1.06 billion.

Rising adjusted free cash flow bolsters the company’s balance sheet, enabling it to focus and invest in strategy to develop product and technology as well as return capital to shareholders.

In March 2019, the company made the announcement of building a vehicle testing facility in Indianapolis, IN. This will allow Allison to test replicating vehicle environments and duty cycles.

However, increasing expenses and customer concentration are headwinds for the company. Also, insufficient product line for hybrid and electrification is a concern.

In the past year, shares of Allison have outperformed the industry it belongs to. Over this time frame, the stock has gained 19.6% against the industry’s decline of 19.2%.

Allison currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the auto space are Ferrari N.V. (RACE - Free Report) , Oshkosh Corp. (OSK - Free Report) and General Motors Company (GM - Free Report) . While Ferrari currently sports a Zacks Rank #1 (Strong Buy), Oshkosh and General Motors carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ferrari has an expected long-term growth rate of 18.5%. Over the past year, shares of the company have risen 5.1%.

Oshkosh has an expected long-term growth rate of 11.3%. Over the past six months, shares of the company have surged 11.1%.

General Motors has an expected long-term growth rate of 8.5%. Over the past three months, shares of the company have risen 12.3%.

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