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Why Is Allison Transmission (ALSN) Down 12.5% 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 lost about 12.5% 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? 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 catalysts.
Allison Earnings & Revenues Surpass Estimates in Q4
Allison’s fourth-quarter 2018 earnings were $1.14 per share, beating the Zacks Consensus Estimate of 95 cents. In the year-ago quarter, the bottom line was $1.51. Net income was $147 million compared with $215 million in fourth-quarter 2017.
In the reported quarter, net sales rose 10% year over year to $647 million. Moreover, it outpaced the Zacks Consensus Estimate of $629 million. Favorable demand outside North America Off-Highway and On-Highway end markets led to rise in sales.
Gross profit increased 17% year over year to $338 million while gross margin was 52.2% compared with 49% recorded in the same period of 2017. This rise was primarily driven by improved net sales, price increases on certain products and positive material costs.
2018 Results
In 2018, the company’s net income increased 27% year over year to $639 million. Further, earnings per share increased 42% to $4.78.
The company’s net sales rose 20% year over year to $2.71 billion.
Quarter in Detail
Allison segregated revenues by the end markets served, which are as follows:
Net sales for the North America On-Highway end market increased 6% to $303 million, driven by higher demand for rugged duty series models and highway series models.
Net sales for the North America Off-Highway end market declined 39% to $17 million. This fall was due to fluctuating demand for hydraulic fracturing applications.
Net sales for the Defense end market went up 44% to $36 million, driven by elevated tracked demand.
Outside North America On-Highway end market’s net sales declined 3% to $95 million, owing to lower demand in South America and Asia.
Net sales for the Outside North America Off-Highway end market increased to $47 million from $11 million in fourth-quarter 2017, driven by improved demand in energy, mining and construction sectors.
Net sales for the Service Parts, Support Equipment & Other end market increased 7% to $149 million primarily due to higher demand for North America service parts and global support equipment.
Financial Details
Allison had cash and cash equivalents of $231 million as of Dec 31, 2018, compared with $199 million as of Dec 31, 2017. Long-term debt was $2.52 billion as of Dec 31, 2018, almost in line with the figure recorded on Dec 31, 2017.
In fourth-quarter 2018, Allison’s net cash provided by operating activities was $232 million compared with $166 million a year ago. Adjusted free cash flow in the reported quarter was $184 million compared with $115 million in the prior-year quarter.
2019 Outlook
For 2019, the company anticipates net sales of $2.58-$2.68 billion, driven by price increases on certain products, growth initiatives and increased demand in the North America On-Highway end market. Further, net income is estimated to be $535-$585 million and adjusted EBITDA is likely to be $1-$1.06 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Allison Transmission has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Allison Transmission has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Allison Transmission (ALSN) Down 12.5% Since Last Earnings Report?
A month has gone by since the last earnings report for Allison Transmission (ALSN - Free Report) . Shares have lost about 12.5% 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? 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 catalysts.
Allison Earnings & Revenues Surpass Estimates in Q4
Allison’s fourth-quarter 2018 earnings were $1.14 per share, beating the Zacks Consensus Estimate of 95 cents. In the year-ago quarter, the bottom line was $1.51. Net income was $147 million compared with $215 million in fourth-quarter 2017.
In the reported quarter, net sales rose 10% year over year to $647 million. Moreover, it outpaced the Zacks Consensus Estimate of $629 million. Favorable demand outside North America Off-Highway and On-Highway end markets led to rise in sales.
Gross profit increased 17% year over year to $338 million while gross margin was 52.2% compared with 49% recorded in the same period of 2017. This rise was primarily driven by improved net sales, price increases on certain products and positive material costs.
2018 Results
In 2018, the company’s net income increased 27% year over year to $639 million. Further, earnings per share increased 42% to $4.78.
The company’s net sales rose 20% year over year to $2.71 billion.
Quarter in Detail
Allison segregated revenues by the end markets served, which are as follows:
Net sales for the North America On-Highway end market increased 6% to $303 million, driven by higher demand for rugged duty series models and highway series models.
Net sales for the North America Off-Highway end market declined 39% to $17 million. This fall was due to fluctuating demand for hydraulic fracturing applications.
Net sales for the Defense end market went up 44% to $36 million, driven by elevated tracked demand.
Outside North America On-Highway end market’s net sales declined 3% to $95 million, owing to lower demand in South America and Asia.
Net sales for the Outside North America Off-Highway end market increased to $47 million from $11 million in fourth-quarter 2017, driven by improved demand in energy, mining and construction sectors.
Net sales for the Service Parts, Support Equipment & Other end market increased 7% to $149 million primarily due to higher demand for North America service parts and global support equipment.
Financial Details
Allison had cash and cash equivalents of $231 million as of Dec 31, 2018, compared with $199 million as of Dec 31, 2017. Long-term debt was $2.52 billion as of Dec 31, 2018, almost in line with the figure recorded on Dec 31, 2017.
In fourth-quarter 2018, Allison’s net cash provided by operating activities was $232 million compared with $166 million a year ago. Adjusted free cash flow in the reported quarter was $184 million compared with $115 million in the prior-year quarter.
2019 Outlook
For 2019, the company anticipates net sales of $2.58-$2.68 billion, driven by price increases on certain products, growth initiatives and increased demand in the North America On-Highway end market. Further, net income is estimated to be $535-$585 million and adjusted EBITDA is likely to be $1-$1.06 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Allison Transmission has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Allison Transmission has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.