Company Reports

Allison Transmission offers fully automatic transmissions for vocational trucks and other commercial vehicles. Because of its high-quality products and the significant efficiency gains its customers achieve, the company has a dominant market share in its core North American on-highway market. Allison operates an asset-light model, requiring relatively modest capital investment. As a result, it is a highly cash-generative business that can fund its product development, growth initiatives, and generous shareholder remuneration policies. Because many of its customers are municipalities, demand for its products is generally less volatile, though we think its total addressable market is somewhat limited.

Allison Transmission delivered 6% growth in its core business to $860 million. The acquired Off-Highway assets from Dana posted sales of $706 million, with growth in all segments except agriculture. Adjusted diluted EPS of $2.73 grew 8% year-over-year, suggesting strong broad-based performance.

Allison Transmission offers fully automatic transmissions for vocational trucks and other commercial vehicles. Owing to the high quality of its products and the significant efficiency gains achieved by its customers, the company has a very dominant market share in its core North American on-highway market. Allison operates an asset-light model, requiring relatively modest capital investment. As a result, it is a highly cash-generative business that can fund its product development, growth initiatives, and generous shareholder remuneration policies. Because many of its customers are municipalities, there is generally less volatility in demand for its products, though we think its total addressable market is somewhat limited.

Allison Transmission offers fully automatic transmissions for vocational trucks and other commercial vehicles. Owing to the high quality of its products and the significant efficiency gains achieved by its customers, the company has a very dominant market share in its core North American on-highway market. Allison operates an asset-light model, requiring relatively modest capital investment. As a result, it is a highly cash-generative business that can fund its product development, growth initiatives, and generous shareholder remuneration policies. Because many of its customers are municipalities, there is generally less volatility in demand for its products, though we think its total addressable market is somewhat limited.

Allison Transmission reported sales of $1.4 billion, an 84% increase, which was flattered by the Dana Off-Highway acquisition. Adjusted EBITDA grew 22% to $362 million (26% margin) and adjusted EPS grew 6% to $2.57. Overall, core Allison was down on difficult comps, while Dana contributed nicely.

Allison Transmission reported sales of $3.01 billion (down 6.7%) with robust growth in defense and record sales in North America off-highway, offsetting known weakness in the core North American on-highway business. The Dana deal was completed at the start of 2026.

Allison Transmission offers fully automatic transmissions for vocational trucks and other commercial vehicles. Owing to the high quality of its products and the significant efficiency gains achieved by its customers, the company has a very dominant market share in its core North American on-highway market. Allison operates an asset-light model, requiring relatively modest capital investment. As a result, it is a highly cash-generative business that can fund its product development, growth initiatives, and generous shareholder remuneration policies. Because many of its customers are municipalities, there is generally less volatility in demand for its products, though we think its total addressable market is somewhat limited.

Current with third-quarter results, Allison Transmission reduced its 2025 guidance, given elevated uncertainty in its core North American on-highway business. It reduced its outlook for revenue and net income by approximately 4% each at the midpoint.

Allison Transmission offers fully automatic transmissions for vocational trucks and other commercial vehicles. Owing to the high quality of its products and the significant efficiency gains achieved by its customers, the company has achieved a very dominant market share in its core North American on-highway market. Allison operates an asset-light model, assembling its value-added solutions and requiring relatively modest capital investment. As a result, it is a highly cash-generative business that can fund its product development, growth initiatives, and generous shareholder remuneration policies. Because many of its customers are municipalities, there is generally less volatility in demand for its products, though we think its total addressable market is somewhat limited.

We are transferring coverage of Allison Transmission, the largest manufacturer of automatic transmissions for medium- and heavy-duty commercial vehicles and a best-in-class operator.

Allison Transmission offers fully automatic transmissions in a variety of vocational trucks and other commercial vehicles. Owing to the high quality of its products and the significant efficiency gains achieved by its customers, the company has achieved very dominant market share in its core North American on-highway market. The company operates an asset-light model, assembling its value-added solutions and requiring relatively modest capital investment. As a result, Allison is a highly cash generative business that can fund its product development, growth initiatives, and generous shareholder remuneration policies. Because many of its customers are municipalities, there is generally less volatility in demand for its solutions, though we think its total addressable market is somewhat limited.

Allison Transmission's second-quarter revenue was flat year over year as an 8.6% decrease in North America on-highway sales was offset by strong performances in defense and outside North America on-highway end-markets. Quarterly record diluted earnings per share of $2.29 rose 7.5%.

Allison Transmission is acquiring most of Dana’s off-highway business for about $2.7 billion in cash, which is about 6.8 times adjusted EBITDA. Allison said the deal should close late in the fourth quarter with funding from new debt and cash on hand. Net leverage will be below 3 times at close with plans to reduce leverage down to under 2 times in the near term, though management gave no specific timing. No revenue synergies were projected, but we see them as possible. Allison on a June 12 call stated that it estimates four years to achieve $120 million of cost synergies across overhead, research, procurement, and operations. We see the deal as transformative but also roughly value neutral, so we are not changing our $99 per share fair value estimate. We will include the deal in our model once it closes.

Allison Transmission's good first quarter showed few signs of tariffs hurting its business. We keep our $99 fair value estimate. The stock increased over 3% in May 1 after-hours trading after Allison reported diluted EPS rising 17.4% year over year to $2.23, beating the $2.04 LSEG consensus, despite revenue falling 2.9%. Free cash flow fell 4.3% but remained healthy at $155 million. We think management did a great job containing overhead costs, which were flat at $86 million. Revenue did not decline due to the key North America on-highway segment, which rose 4%, while defense grew 10% on price increases. Outside North America, on-highway fell 3% on European weakness, which we suspect will not be isolated to the first quarter. The global off-highway business, although only 2.3% of revenue, saw sales fall 61% on poor demand from energy and mining customers outside North America.

We believe Allison will continue to be the top supplier of fully automatic truck transmissions, despite increasing regulation of emissions by government authorities. The company dominates the medium-duty market, commanding approximately 80% share in some verticals (school buses, Class 6-7 trucks, and Class 8 straight trucks). Allison's strong brand is underpinned by its high-performing and extremely durable transmissions. This has led to the company benefiting from pricing power. Management sees about a $400 million incremental revenue opportunity from areas such as defense and wide body mining dump vehicles.

Allison Transmission’s fourth quarter was solid, largely on continued volume and pricing strength in North America on-highway from strong Class 8 vocational vehicle demand. Revenue grew 2.7% year over year to $796 million, and diluted earnings per share rose 5.2% to $2.01, both surpassing LSEG consensus estimates. However, shares fell over 10% in Feb. 11 after-hours trading, likely on 2025 guidance that was lower than we had forecast. We are not changing our $92 per share fair value estimate but will reassess all valuation inputs when we roll our model forward for the 10-K.

We believe Allison will continue to be the top supplier of fully automatic truck transmissions, despite increasing regulation of emissions by government authorities. The company dominates the medium-duty market, commanding approximately 80% share in some verticals (school buses, Class 6-7 trucks, and Class 8 straight trucks). Allison's strong brand is underpinned by its high-performing and extremely durable transmissions. This has led to the company benefiting from pricing power.

Allison Transmission’s third-quarter results posted quarterly records for revenue and EPS. The company’s largest segment, North America on-highway, continues to benefit from strong end market demand, particularly in Class 8 vocational vehicles, a segment well suited for automatic transmissions. Total company revenue increased 12% year over year to $824 million, and diluted earnings per share rose 29% to $2.27, both well above the LSEG consensus of $790 million and $2.02, respectively, which sent the stock up over 2.5% in Oct. 29 after-hours trading. After adjusting our 2024 projections for better-than-expected revenue growth in North America on-highway and the time value of money, we raise our per share fair value estimate to $92 from $87.

Allison Transmission’s second quarter saw strong contributions from the firm’s key market of North American on-highway trucks. We raise our fair value estimate to $87 per share from $85 on the time value of money and a lower tax rate (19% instead of 21%) for 2024 and 2025 based on how 2024 is tracking. Diluted earnings per share rose 11% year over year to $2.13 and management cited unprecedented demand for Class 8 vocational vehicles. This strength and pricing increases, likely to continue, led to increased 2024 guidance for revenue, adjusted EBITDA, net income, and adjusted free cash flow. The midpoint for revenue is now $3.13 billion, up from $3.1 billion, and adjusted EBITDA’s midpoint is now $1.115 billion, up from $1.1 billion.

We believe Allison will continue to be the top supplier of fully automatic truck transmissions, despite increasing regulation of emissions by government authorities. The company dominates the medium-duty market, commanding approximately 80% share in some verticals (school buses, Class 6-7 trucks, and Class 8 straight trucks). Allison's strong brand is underpinned by its high-performing and extremely durable transmissions. This has led to the company benefiting from pricing power.