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Allison (ALSN) Beats Earnings and Revenue Estimates in Q2

Zacks Equity Research

Allison Transmission Holdings Inc.’s ALSN second-quarter 2019 earnings were $1.46 per share, which beat the Zacks Consensus Estimate of $1.20. In the year-ago quarter, the bottom line was $1.29. Net income in the quarter under review was $181 million compared with $174 million in the year-ago quarter.

In the reported quarter, net sales rose 4% year over year to $737 million. Moreover, the figure outpaced the Zacks Consensus Estimate of $688 million. Favorable demand outside North America Off-Highway and North America On-Highway end markets drove sales.

Gross profit increased 4% year over year to $389 million. Gross margin was 52.8% compared with 52.6% recorded prior-year quarter. This upside was primarily driven by improved net sales and price increases on certain products.
 

Allison Transmission Holdings, Inc. Price, Consensus and EPS Surprise

 

Allison Transmission Holdings, Inc. Price, Consensus and EPS Surprise

Allison Transmission Holdings, Inc. price-consensus-eps-surprise-chart | Allison Transmission Holdings, Inc. Quote

 

Quarter in Detail

Allison segregated revenues by the end markets served, which are as follows:

Net sales in the North America On-Highway end market increased 16% to $398 million, driven by higher demand for rugged duty series and highway series models.

Net sales in the North America Off-Highway end market declined $31 million to $9 million. The downside was caused by lower demand from hydraulic fracturing applications.

Net sales in the Defense end market went down 14% to $37 million, driven by intra-year movement in the timing of tracked vehicle demand.

The Outside North America On-Highway end market’s net sales increased 5% to $106 million, owing to higher demand in Europe and South America.

Net sales in the Outside North America Off-Highway end market increased $24 million to $40 million in second-quarter 2019 on higher demand in the energy sector.

Net sales in the Service Parts, Support Equipment & Other end market fell 13% to $147 million, thanks to lower demand for North America service parts.

Financial Details

Allison had cash and cash equivalents of $153 million as of Jun 30, 2019 compared with $231 million as of Dec 31, 2018. Long-term debt was $2.5 billion as of Jun 30, almost in line with the figure recorded on Dec 31, 2018.

In second-quarter 2019, the company’s net cash provided by operating activities was $239 million compared with $213 million in the year-ago quarter. Adjusted free cash flow in the reported quarter was $214 million compared with $194 million in the prior-year quarter.

2019 Outlook

Allison reiterated its guidance for 2019. For the year, it anticipates net sales in the range of $2.63-$2.71 billion. Further, net income is estimated to be $545-$585 million and adjusted EBITDA is projected in the band of $1.03-$1.08 billion.

Zacks Rank & Stocks to Consider

Currently, Allison has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the auto space worth considering are Copart, Inc CPRT, CarMax, Inc KMX and Gentex Corporation GNTX. While Copart sports a Zacks Rank #1 (Strong Buy), CarMax and Gentex carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Copart has an expected long-term growth rate of 20%. In the past year, shares of the company have rallied 34.7%.

CarMax has an expected long-term growth rate of 12.6%. In the past year, shares of the company have moved up 19.9%.

Gentex has an expected long-term growth rate of 5%. In the past year, shares of the company have returned 20.9%.

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