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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.

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1.b. Last Insights on ALSN

Allison Transmission Holdings, Inc.'s recent performance was positively driven by several factors. The company's acquisition of Dana's Off-Highway unit for $2.7 billion expanded its global reach, defense exposure, and technology portfolio. Additionally, the company reported better-than-expected Q4 earnings, with a solid 2026 outlook. A 7% dividend hike to 29 cents, marking the seventh straight year of increase, also fueled growth plans. Institutional investors, such as Dimensional Fund Advisors LP, increased their stake in the company, with a 1.8% growth in shares. Partnerships, like the one with Daimler Truck North America, also contributed to the positive momentum.

1.c. Company Highlights

2. Allison Transmission's Q4 2025 Earnings: A Strong Performance Amidst Challenging Market Conditions

Allison Transmission reported a 7% year-over-year decrease in revenue for the full year 2025, mainly due to global trade policies, uncertainties, and sluggish economic growth. However, the company increased its full-year adjusted EBITDA margin by 140 basis points to 37.5%. The actual EPS came out at $1.7, beating estimates of $1.56. Revenue for 2025 was impacted by various factors, including a decline in the North America On-Highway end market. For 2026, the company is guiding for consolidated net sales in the range of $5.575 billion to $5.925 billion, representing a 5.8% growth at the midpoint, which is in line with analyst estimates.

Publication Date: Feb -25

📋 Highlights
  • Acquisition Expansion:: Acquired Dana's Off-Highway Drive & Motion Systems, adding 14,000 employees in 25 countries with $120M annual synergy target.
  • Margin Improvement:: Full-year 2025 adjusted EBITDA margin rose 140 bps to 37.5%, despite 7% revenue decline due to global trade and economic headwinds.
  • Defense Revenue Growth:: Achieved $100M incremental annual revenue in defense markets, driven by international demand and strategic partnerships.
  • Synergy Realization:: Targeting $120M in annual run-rate synergies by 2026, focused on procurement, vertical integration, and best-cost manufacturing.
  • 2026 Guidance:: Projects consolidated net sales of $5.575B–$5.925B and adjusted EBITDA of $1.365B–$1.515B, with EBITDA margin guidance of 27%–29% post-synergy capture.

Financial Performance and Guidance

The company's adjusted EBITDA margin guidance assumes continued softness in the North America On-Highway end market. Despite the challenges, Allison Transmission is confident in its ability to generate substantial and sustainable free cash flow as a combined business, with a robust cash generation ensuring its capital allocation priorities remain intact. The company's guidance for 2026 suggests a consolidated adjusted EBITDA margin in the range of 24.5% to 25.6%, which is slightly lower than the current margin.

Valuation and Metrics

Using the current price, the stock trades at a P/E Ratio of 16.46, P/B Ratio of 5.49, and EV/EBITDA of 11.76. The ROE is 34.97%, and the ROIC is 13.99%. The Net Debt / EBITDA ratio is 1.42, indicating a manageable debt level. The Free Cash Flow Yield is 7.8%, which is relatively attractive. These metrics suggest that the stock is reasonably valued, but the market is expecting a certain level of growth and profitability.

Synergies and Cost Savings

The acquisition of Dana's Off-Highway Drive & Motion Systems business is expected to bring $120 million of annual run-rate synergies over the next few years. The company is confident in achieving these cost synergies and is taking a thoughtful and measured approach to implementation. As Dave Graziosi mentioned, "We're confident in achieving the $120 million annual run rate in cost synergies." The synergies will likely contribute to the company's profitability and help offset the impact of tariffs and inflationary pressure.

Outlook and End Market Guidance

The company's guidance assumes no recovery for Class 8 trucks and a decline in North America On-Highway due to soft medium-duty activity. However, the defense segment is expected to continue growing, particularly outside North America. The Off-Highway segment is subject to various end markets, including construction, material handling, and agriculture, which are facing challenges. The company's prudent approach to guidance reflects the uncertainty in these end markets.

3. NewsRoom

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Reviewing Beam Global (NASDAQ:BEEM) & Allison Transmission (NYSE:ALSN)

Mar -20

Source: defenseworld.net

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ALSN vs. RACE: Which Stock Is the Better Value Option?

Mar -19

Source: zacks.com

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Daimler Truck North America partners with Allison Transmission to deliver advanced propulsion solutions for Freightliner M2 106 Plus

Mar -10

Source: prnewswire.com

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Allison Transmission Holdings, Inc. $ALSN Shares Purchased by Dimensional Fund Advisors LP

Mar -10

Source: defenseworld.net

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Allison Transmission Hikes Dividend: How to Play the Stock Now?

Feb -27

Source:

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Allison Announces a 7 Percent Increase to the Quarterly Dividend and the Annual Stockholders Meeting and Record Date

Feb -26

Source: prnewswire.com

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New Strong Buy Stocks for February 26th

Feb -26

Source: zacks.com

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Allison Transmission Shares Higher on Institutional Power

Feb -25

Source: fxempire.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

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

117.06$

Current Price

117.06$

Potential

-0.00%

Expected Cash-Flows