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Allison (ALSN) Announces Twin Acquisitions for $103 Million

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Allison Transmission Holdings, Inc. ALSN recently announced the acquisition of Lewisburg-based Walker Die Casting, Inc. and Alabama-based C&R Tool and Engineering, Inc. for $103 million. Notably, Walker Die is one of the longtime suppliers of aluminum transmission castings to Allison, while C&R is an affiliated tool and die maker that supplies Walker Die with metal working tools. The acquired firms will be run as Allison plants and continue to operate in their respective locations.

While the transaction is not expected to have any material impact on earnings for the current fiscal year, the vertical integration would certainly lead to improvement in efficiencies, cost reductions and enable a better quality assurance process, going forward.

Markedly, Allison is the largest manufacturer of fully-automatic transmissions for medium and heavy-duty commercial vehicles. Although it has a strong and diversified presence in North America, the company is focusing on increasing footprint in emerging and under-served markets. Allison is growing share in core end markets served, and making investments to position itself well to be a global leader in propulsion solution.

Of late, Allison has increased the pace of development of products that cater to electrification and fuel cell markets for commercial vehicles. In this regard, early this year, the firm announced acquisitions of Vantage Power and AxleTech’s electric vehicle (EV) systems division.

Lower operating working capital requirements, decreased cash interest expense and increased gross profits are driving cash flow of this Zacks Rank #2 (Buy) firm. Rising adjusted free cash flow is bolstering the balance sheet, in turn enabling it to focus on investment strategies to develop products and technology. The company continues to deploy a shareholder-friendly capital allocation strategy through dividends and buybacks, as is evident from an increase in the buyback authorization by $1 billion in May 2019.

For 2019, Allison anticipates net sales of $2.63-$2.71 billion on the back of ongoing growth initiatives, strong demand in the North America On-Highway end market and price increase of certain products. For the current year, Allison’s net income and adjusted EBITDA are estimated within $545-$585 million and $1.03-$1.08 billion, respectively.

Other top-ranked players in the industry include Wabash National Corporation WNC, Meritor, Inc. MTOR and Oshkosh Corporation OSK. While Wabash sports a Zacks Rank #1 (Strong Buy), Meritor and Oshkosh are #2 Ranked firms. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Allison Transmission Holdings, Inc. (ALSN) : Free Stock Analysis Report
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