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Allison Transmission Holdings Inc. ALSN reported third-quarter 2020 earnings of 68 cents per share, beating the Zacks Consensus Estimate of 46 cents.
It delivered better-than-anticipated results on stellar revenues from the North America On-Highway, Defense, Outside North America On-Highway and Service Parts, Support Equipment & Other end markets.
The bottom line, however, is lower than the year-ago quarter’s earnings of $1.23 per share.
Net income for the reported quarter came in at $77 million compared with the $149 million recorded in the year-ago quarter. This downside primarily resulted from lower net sales and higher selling, general and administrative (SG&A) expenses, partially offset by reduced manufacturing expense, price inflation of certain products and the intra-year timing of product initiatives spending.
During the September-end quarter, net sales slid 20% year on year to $532 million. The figure, nevertheless, surpassed the Zacks Consensus Estimate of $456 million. Gross profit declined 27% year over year to $254 million. Gross margin was 47.7% compared with the prior-year quarter’s 52%. This decrease in gross profit chiefly stemmed from lower net sales, partially muted by lower manufacturing expense corresponding to decreased net sales, price hike on few products and reduced incentive-compensation expense.
Allison Transmission Holdings, Inc. Price, Consensus and EPS Surprise
Allison Transmission Holdings, Inc. price-consensus-eps-surprise-chart | Allison Transmission Holdings, Inc. Quote
Allison segregates its revenues by the end markets served, which are as follows:
For the reported quarter, net sales in the North America On-Highway end market dipped 24% year over year to $281 million on dwindling demand for Rugged Duty series and Highway series models. The sales figure, however, outpaced the Zacks Consensus Estimate of $218 million.
For the July-September period, net sales in the North America Off-Highway end market tanked 83% year over year to $1 million. Waning demand for hydraulic fracturing applications resulted in this decline. Moreover, the sales figure missed the Zacks Consensus Estimate of $1.5 million.
For the third quarter, net sales in the Defense end market jumped 40% year over year to $56 million on higher tracked vehicle demand. The figure also beat the Zacks Consensus Estimate of $46 million.
The Outside North America On-Highway end market’s net sales fell 28% year on year to $71 million during the September-end quarter on soft global demand amid the pandemic. The figure, however, beat the Zacks Consensus Estimate of $59 million.
Net sales in the Outside North America Off-Highway end market slumped 83% year on year to $4 million during the third quarter, due to dismal demand in the energy, mining and construction sectors. In addition, the reported figure lagged the Zacks Consensus Estimate of $17.4 million.
Net sales in the Service Parts, Support Equipment & Other end market declined 9% year on year to $119 million in the reported quarter, due to shrinking demand for North America service parts and support equipment. The figure, however, topped the Zacks Consensus Estimate of $111 million.
Financial Position & Dividend
Allison had cash and cash equivalents of $251 million as of Sep 30, 2020, compared with $192 million as of Dec 31, 2019. As of Sep 30, 2020, long-term debt was $2,510 million, as compared to $2,512 million as of Dec 31, 2019.
During September-end quarter, the company’s net cash provided by operating activities was $158 million compared with the year-ago quarter’s $212 million. Adjusted free cash flow in the reported quarter was $136 million, down from the prior-year quarter’s $165 million.
During the third quarter, the company settled $16 million in share repurchases and paid a dividend of 17 cents per share.
Allison projects net sales for 2020 in the range of $2,025-$2,075 million, net income in the $285-$315 million band, adjusted EBITDA of $690-$730 million, net cash provided by operating activities at $490-$520 million, adjusted free cash flow between $385 million and $425 million, and capital expenditures between $107 million and $117 million.
The full-year net sales guidance reflects lackluster demand across all end markets except for the Defense end market as a result of the coronavirus pandemic, partially negated by price inflation of certain products.
Zacks Rank & Key Picks
Allison currently carries a Zacks Rank #3 (Hold). Shares of the company have depreciated 21.8%, year to date, while the industry has witnessed a fall of 4.4%.
Some better-ranked stocks in the auto sector include Lear Corporation LEA, Autoliv Inc ALV and LCI Industries LCII, all of which sport a Zacks Rank of 1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
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