Allison Transmission Holdings Inc.’s ALSN third-quarter 2019 earnings came in at $1.23 per share, beating the Zacks Consensus Estimate of $1.13. It delivered better-than-expected results on the back of higher-than-anticipated revenues of $369 million from the North America On Highway end market, outpacing the Zacks Consensus Estimate of $349 million. The reported figure, however, comes in lower than the year-ago quarter’s $1.27.
Net income in the third quarter declined to $149 million compared with the $167 million recorded in the year-ago quarter. This downside primarily resulted from lower gross profit, increased product-initiatives spending and elevatedinterest expense.
In the reported quarter, net sales declined 3% year over year to $669 million due to lower demand in the Service Parts, Support Equipment & Other and Global Off-Highway end markets.However, the figure outpaced the Zacks Consensus Estimate of $664 million. Gross profit decreased5% year over year to $348 million. Gross margin was 52% compared with 53.2% recorded in the prior-year quarter. This downside primarily stemmed from lower net sales and higher manufacturing expenses.
Allison Transmission Holdings, Inc. Price and Consensus
Allison Transmission Holdings, Inc. price-consensus-chart | Allison Transmission Holdings, Inc. Quote
Quarter in Detail
Allison segregates itsrevenues by the end markets served, which are as follows:
Net sales in the North America On-Highway end market increased 11% year over year to $369 million, driven by stellardemand for rugged duty series and highway series models. This wasled by the continued execution of growth initiatives and market-share gains in the company’s Class 4/5 truck.
Net sales in the North America Off-Highway end market tanked50% year over year to $6 million. Thisdownside was caused by lower demand from hydraulic fracturing applications.
Net sales in the Defense end market went down 5% to $40 million, due to lower demand for Wheeled vehicle.
The Outside North America On-Highway end market’s net sales increased 3% to $99 million, owing to higher demand in Europe and South America, partially offset by lower demand in Asia.
Net sales in the Outside North America Off-Highway end market plummeted48% to $24 million in third-quarter 2019 on lower demand in the mining and energy sectors.
Net sales in the Service Parts, Support Equipment & Other end market fell 20% to $131 million, due to lower demand for North America service parts.
Allison had cash and cash equivalents of $152 million as of Sep 30, 2019 compared with $231 million as of Dec 31, 2018. Long-term debt was $2,513 million as of Sep 30, 2019, compared with the $2,523 million recorded on Dec 31, 2018. The debt-to-capital ratio stands at 77.2%.
In third-quarter 2019, the company’s net cash provided by operating activities was $212 million compared with the year-ago quarter’s $239 million. Adjusted free cash flow (FCF) in the reported quarter was $165 million compared with the prior-year quarter’s $216 million.
Allison reiterated its guidance for 2019. For the year, it anticipates net sales in the range of $2.65-$2.7 billion. Further, net income is estimated to be $555-$575 million and adjusted EBITDA is projected at $1.03-$1.07 billion.
For full-year 2019, net cash provided by operating activities is projected at $745-$775 million, while adjusted FCF is expected in the range of $570-$610 million.
Zacks Rank & Stocks to Consider
Currently, Allison carriesa Zacks Rank #4 (Sell).
A few better-ranked stocks worth considering are Kinross Gold Corporation KGC, sporting a Zacks Rank #1 (Strong Buy), and Aaron's, Inc. AAN and Alamos Gold Inc. AGI, both carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinross Gold has an expected earnings growth rate of 210% for 2019. The company’s shares have soared 85.3% in the past year.
Aaron's has an estimated earnings growth rate of 17.56% for the ongoing year. The company’s shares have surged roughly 62.6% in a year’s time.
Alamos Gold has a projected earnings growth rate of a whopping 340% for the current year. Its shares have gained around 27% over the past year.
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