Download PDF

1. Company Snapshot

1.a. Company Description

Allison Transmission Holdings, Inc., together with its subsidiaries, designs, manufactures, and sells commercial and defense fully-automatic transmissions for medium-and heavy-duty commercial vehicles, and medium-and heavy-tactical U.S. defense vehicles worldwide.It offers transmissions for various applications, including distribution, refuse, construction, fire, and emergency on-highway trucks; school and transit buses; motor homes; energy, mining, and construction off-highway vehicles and equipment; and wheeled and tracked defense vehicles.The company markets its transmissions under the Allison Transmission brand name; and remanufactured transmissions under the ReTran brand name.


It also sells branded replacement parts, support equipment, aluminum die cast components, and other products necessary to service the installed base of vehicles utilizing its transmissions, as well as defense kits, engineering services, and extended transmission coverage services to various original equipment manufacturers, distributors, and the U.S. government.The company serves customers through an independent network of approximately 1,400 independent distributor and dealer locations.The company was formerly known as Clutch Holdings, Inc.


Allison Transmission Holdings, Inc.was founded in 1915 and is headquartered in Indianapolis, Indiana.

Show Full description

1.b. Last Insights on ALSN

The recent 3-month performance of Allison Transmission Holdings, Inc. was driven by strong Q1 2025 earnings, with net income of $192 million, up 14% year-over-year, and diluted EPS of $2.23, up 17% year-over-year. The company's adjusted EBITDA margin of 37.5% also improved by 90 basis points year-over-year. Additionally, Allison Transmission declared a quarterly dividend of $0.27 per share, indicating a commitment to returning value to shareholders. Furthermore, the company's guidance for full-year 2025 net sales and net income in the band of $3.2-$3.3 billion and $735-$785 million, respectively, suggests a positive outlook.

1.c. Company Highlights

2. Allison Transmission's Q3 2025 Earnings: Navigating Market Uncertainty

Allison Transmission reported a revenue decline of 16% year-over-year to $693 million in Q3 2025, with net income decreasing to $137 million from $200 million in the same period last year. The company's adjusted EBITDA margin remained relatively stable at 37%, and adjusted free cash flow was $184 million. Earnings per share (EPS) came in at $1.63, missing analyst estimates of $1.95. The company's strong cash generation and cost management helped mitigate the impact of the challenging market conditions.

Publication Date: Oct -31

📋 Highlights
  • Revenue Decline:: Q3 2025 net sales fell 16% YoY to $693 million due to reduced North America On-Highway demand
  • Adjusted EBITDA Margin:: Maintained 37% margin despite macroeconomic challenges, aligning with prior year
  • Free Cash Flow Strength:: Generated $184 million adjusted free cash flow, with $1.65 billion liquidity ($902M cash + $745M credit)
  • Net Leverage Ratio:: Ended Q3 at 1.33x net leverage, reflecting disciplined cash management
  • 2025 Guidance Revision:: Full-year net sales projected at $2.975B–$3.025B; adjusted EBITDA at $1.09B–$1.125B

Market Challenges and Response

The North America On-Highway end market, Allison Transmission's largest segment, was negatively affected by global macroeconomic factors, leading to reduced demand for commercial vehicles. As Dave Graziosi noted, "Our performance during the third quarter reflects Allison's resilience, with the ability to flex our operating cost structure and generate meaningful cash flow during low-demand environments." The company's efforts to manage costs and adjust to the market conditions helped maintain its adjusted EBITDA margin.

Guidance and Outlook

Allison Transmission revised its full-year 2025 guidance, with net sales expected to be between $2.975 billion and $3.025 billion. The company also expects net income to be in the range of $620 million to $650 million. Analysts estimate revenue growth of 0.4% for the next year, indicating a gradual recovery. The company's focus on maintaining margins and growing its international On-Highway business is expected to drive future growth.

Valuation and Metrics

Allison Transmission's current valuation metrics indicate a relatively attractive position. The stock trades at a P/E Ratio of 10.05, P/B Ratio of 3.82, and EV/EBITDA of 7.91. The company's Return on Equity (ROE) stands at 40.46%, and its Return on Invested Capital (ROIC) is 14.97%. The Net Debt / EBITDA ratio is 1.39, indicating a manageable debt position. With a Free Cash Flow Yield of 11.25%, the company appears to be generating significant cash relative to its market value.

3. NewsRoom

Card image cap

Touchstone Mid Cap Fund Q3 2025 Portfolio Review

Nov -24

Source: seekingalpha.com

Card image cap

Dana and Allison Announce All Required Regulatory Approvals Received for Off-Highway Business Transaction

Nov -19

Source: prnewswire.com

Card image cap

Aviva PLC Takes $488,000 Position in Allison Transmission Holdings, Inc. $ALSN

Nov -14

Source: defenseworld.net

Card image cap

Bank of New York Mellon Corp Has $60.66 Million Position in Allison Transmission Holdings, Inc. $ALSN

Nov -11

Source: defenseworld.net

Card image cap

Bank of Montreal Can Has $6.73 Million Stock Position in Allison Transmission Holdings, Inc. $ALSN

Nov -11

Source: defenseworld.net

Card image cap

Allison Transmission Declares Quarterly Dividend

Nov -10

Source: prnewswire.com

Card image cap

Allison Transmission Prices Offering of $500 Million Aggregate Principal Amount of 5.875% Senior Notes Due 2033 and $1,200 Million Senior Secured Incremental Term Loan Facility

Nov -06

Source: prnewswire.com

Card image cap

Allison Transmission Q3 Earnings Miss Estimates, Guidance Trimmed

Oct -30

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.80%)

6. Segments

North America On-highway

Expected Growth: 4%

Allison Transmission's North America On-highway segment growth is driven by increasing demand for medium- and heavy-duty trucks, fueled by a strong economy, infrastructure development, and rising freight volumes. Additionally, the adoption of alternative fuels and electrification in the transportation sector is expected to boost demand for Allison's transmission systems.

Service Parts, Support Equipment and Other

Expected Growth: 3%

Allison Transmission Holdings, Inc.'s 3% growth in Service Parts, Support Equipment, and Other is driven by increasing demand for aftermarket services, expansion of global distribution networks, and strategic partnerships. Additionally, growth in the construction and mining industries, as well as the need for replacement parts, contribute to this segment's growth.

Outside North America On-highway

Expected Growth: 5%

Outside North America On-highway segment growth driven by increasing demand for medium- and heavy-duty trucks in emerging markets, such as China and India, coupled with Allison's market share gains, and growing adoption of automatic transmissions in regions with increasing urbanization and infrastructure development.

Defense

Expected Growth: 2%

Allison Transmission Holdings, Inc.'s 2% growth in Defense segment is driven by increasing demand for military vehicles, modernization of existing fleets, and expansion into adjacent markets such as electrification and autonomous systems. Additionally, the company's focus on innovation, cost reduction, and strategic partnerships also contribute to its growth.

Outside North America Off-highway

Expected Growth: 4%

Outside North America Off-highway segment growth driven by increasing infrastructure development, rising demand for construction and mining equipment, and growing adoption of emission-reducing technologies in emerging markets, particularly in Asia and Latin America, where governments are investing in infrastructure development and urbanization projects.

North America Off-highway

Expected Growth: 3%

The 3% growth in North America Off-highway segment of Allison Transmission Holdings, Inc. is driven by increasing demand for construction and mining equipment, government investments in infrastructure development, and rising adoption of emission-reducing technologies in off-highway vehicles.

7. Detailed Products

Fully Automatic Transmissions

Allison Transmission Holdings, Inc. offers fully automatic transmissions for medium- and heavy-duty commercial vehicles, providing smooth and efficient power delivery.

Automated Manual Transmissions

Allison Transmission Holdings, Inc. provides automated manual transmissions for medium- and heavy-duty commercial vehicles, offering improved fuel efficiency and reduced emissions.

Hybrid Transmissions

Allison Transmission Holdings, Inc. offers hybrid transmissions for medium- and heavy-duty commercial vehicles, providing improved fuel efficiency and reduced emissions.

Electric Hybrid Transmissions

Allison Transmission Holdings, Inc. provides electric hybrid transmissions for medium- and heavy-duty commercial vehicles, offering improved fuel efficiency and reduced emissions.

Off-Highway Transmissions

Allison Transmission Holdings, Inc. offers off-highway transmissions for construction, mining, and agricultural applications, providing reliable and efficient power delivery.

Defense Transmissions

Allison Transmission Holdings, Inc. provides defense transmissions for military vehicles, offering reliable and efficient power delivery in harsh environments.

8. Allison Transmission Holdings, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Allison Transmission Holdings, Inc. is medium. While there are some substitutes available in the market, they are not a significant threat to the company's business.

Bargaining Power Of Customers

The bargaining power of customers for Allison Transmission Holdings, Inc. is low. The company's customers are largely dependent on its products, and there are no significant alternatives available.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Allison Transmission Holdings, Inc. is medium. While the company has some negotiating power, its suppliers also have some bargaining power due to the specialized nature of their products.

Threat Of New Entrants

The threat of new entrants for Allison Transmission Holdings, Inc. is low. The company's products require significant investment in research and development, and there are high barriers to entry in the industry.

Intensity Of Rivalry

The intensity of rivalry for Allison Transmission Holdings, Inc. is high. The company operates in a highly competitive industry, and there are several established players competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 67.03%
Debt Cost 5.80%
Equity Weight 32.97%
Equity Cost 9.16%
WACC 6.91%
Leverage 203.33%

11. Quality Control: Allison Transmission Holdings, Inc. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Allison Transmission Holdings

A-Score: 5.6/10

Value: 5.8

Growth: 7.4

Quality: 7.5

Yield: 2.0

Momentum: 3.0

Volatility: 8.0

1-Year Total Return ->

View Full Report
Stock-Card
Lear

A-Score: 5.6/10

Value: 7.9

Growth: 5.1

Quality: 4.1

Yield: 5.0

Momentum: 4.0

Volatility: 7.3

1-Year Total Return ->

View Full Report
Stock-Card
Dorman Products

A-Score: 5.6/10

Value: 3.7

Growth: 8.0

Quality: 6.5

Yield: 0.0

Momentum: 8.5

Volatility: 6.7

1-Year Total Return ->

View Full Report
Stock-Card
LKQ

A-Score: 5.4/10

Value: 7.4

Growth: 5.4

Quality: 4.9

Yield: 6.0

Momentum: 2.0

Volatility: 7.0

1-Year Total Return ->

View Full Report
Stock-Card
Gentex

A-Score: 5.4/10

Value: 7.3

Growth: 5.6

Quality: 5.4

Yield: 3.0

Momentum: 4.0

Volatility: 7.3

1-Year Total Return ->

View Full Report
Stock-Card
BorgWarner

A-Score: 5.2/10

Value: 5.3

Growth: 3.7

Quality: 4.5

Yield: 2.0

Momentum: 8.0

Volatility: 8.0

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

90.86$

Current Price

90.86$

Potential

-0.00%

Expected Cash-Flows