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Allison (ALSN) Q3 Earnings Match Estimates, Sales Beat

Allison Transmission ALSN posted third-quarter earnings of 89 cents a share, which matched the Zacks Consensus Estimate but increased 31% on a year-over-year basis. Quarterly revenues of $567 million grew 7% from the comparable year-ago period but fell short of the consensus mark of $588 million.

Segmental Performance

Allison segregates revenues in terms of end markets served, which are as follows:

For the reported quarter, net sales in the North America On-Highway end market inched down 2% year over year to $275 million amid lower demand owing to supply disruptions and raw material constraints. The metric also missed the Zacks Consensus Estimate of $298 million.

For the July-September period, net sales in the North America Off-Highway end market jumped to $20 million from $1 million recorded in the year-ago period on higher demand for hydraulic fracturing applications. The metric also surpassed the Zacks Consensus Estimate of $6.75 million.

For the third quarter, net sales in the Defense end market contracted 30% year over year to $39 million on lower tracked vehicle demand. The figure also missed the consensus estimate of $47 million.

The Outside North America On-Highway end market’s net sales surged 31% year on year to $93 million for the September-end quarter, courtesy of growth initiatives and recovery of customer demand from pandemic-related disruptions in the corresponding period of 2020. The metric also topped the consensus mark of $89 million.

Net sales in the Outside North America Off-Highway end market skyrocketed 250% year on year to $14 million on higher demand from energy, mining and construction sectors. The metric, however, missed the consensus mark of $18 million.

Net sales in the Service Parts, Support Equipment & Other end market rose 6% year on year to $126 million for the reported quarter owing to higher demand for global service parts as well as support equipment. Nonetheless, the figure fell short of the consensus mark of $131 million.

Financial Position & ’21 View

Allison — whose peers include Magna International MGAAdient plc ADNT, and Meritor MTOR — had cash and cash equivalents of $261 million on Sep 30, 2021 compared with $310 million as of 2020-end. As of Sep 30, long-term debt was $2,504 million, essentially unchanged from the 2020-end level. Adjusted free cash flow for the reported quarter was $153 million, up from the prior-year quarter’s $136 million.

Amid persistent supply chain disruptions, Allison has trimmed its full-year guidance. It now projects net sales in the band of $2,325-$2,400 million versus the prior estimate of $2,325-$2,475 million. Net income and adjusted EBITDA are now envisioned in the band of $395-$440 million and $795-$845 million, down from the previous projection of $395-$465 million and $795-$885 million, respectively. Adjusted free cash flow is expected within $415-$455 million, down from the prior guided range of $415-$475 million. Capex forecast remains unchanged in the band of $170-$180 million.

During the quarter under discussion, Allison — which presently carries a Zacks Rank #3 (Hold) — paid a quarterly dividend of 19 cents per share and bought back $100 million of common stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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