This is an old version of ALSN from 10 days ago (Nov 3, 2026).See the latest version
ALSN
- Price
- $118.92
- Discount category
- Below intrinsic value
- Next earnings
- Feb 2, 2027
- Next earnings is estimate
- Yes
- Company name
- Allison Transmission
- Sector
- Commercial vehicle drivetrains
- About
- Allison Transmission designs and makes fully automatic transmissions for medium-duty and heavy-duty commercial vehicles, such as trucks, buses and military vehicles. It sells to vehicle makers around the world, and it also sells parts and service. On January 1, 2026, Allison bought Dana's Off-Highway business for $2.732 billion. That business, now called Allison Off-Highway, makes axles, transmissions and drive systems for construction, mining and farm machines. In Q3 2026, the Allison Transmission business unit had record net sales of $881 million with an adjusted EBITDA margin of 38%, and Allison Off-Highway had net sales of $653 million with an adjusted EBITDA margin of 13%. Net sales were $3 billion in 2025, before the purchase.
- Thesis
- The market prices Allison for the risk of a downturn in truck demand and for the cost of its large purchase. North American truck sales move in cycles, and electric vehicles may need fewer conventional transmissions in the long term. The Off-Highway purchase added debt: total debt was $4.01 billion and net debt $3.52 billion at September 30, 2026. The new business also has a much lower margin than the legacy business, and its farm and industrial markets have not recovered yet. Allison expects about $125 million of one-time costs in 2026 for the separation, integration and restructuring of Off-Highway. For the gap to close, three things must be true. Allison must reach its 2026 guidance, which it raised again on November 2, 2026, to adjusted EBITDA of $1,530 million to $1,580 million and adjusted free cash flow of $850 million to $900 million. The Off-Highway margin must rise from the 13% of Q3 2026 as Allison captures the planned synergies. Free cash flow must keep lowering net debt toward the company's leverage target. The 2027 guidance with the Q4 2026 report, expected in early February 2027, is the main test. If these checks pass, the gap can close over the next three to six quarters. The main reason it may not close is a fall in North American truck demand, which drives most of the legacy profit.
- Risks
- Demand for trucks and buses moves in cycles. North American on-highway trucks give much of the legacy profit. A downturn in truck orders lowers sales of Allison's high-margin transmissions. The Off-Highway purchase raised debt, which was $4.01 billion at September 30, 2026. Its adjusted EBITDA margin was 13% in Q3 2026, compared with 38% for the legacy business. If integration costs are higher or synergies are lower than planned, the deal can lower returns. Electric commercial vehicles may need fewer or simpler transmissions. Allison sells electric axles and hybrid systems, but a faster change to electric drives can reduce demand for its main products. Off-Highway sells to construction, mining and farm markets. Allison said in November 2026 that demand in the agriculture and industrial markets stayed weak. A longer farm downturn can delay the margin gains it expects.
- Balance sheet
- Cash: $497M Debt: $4.0B Net debt: $3.5B Interest cover: 4.8× Undrawn credit line: $996M, to January 2031 Debt due within 12 months: $20M Allison funds its operations with term loans, senior notes and a revolving credit facility. At September 30, 2026, total debt was $4,012 million and net debt was $3,515 million, so cash was $497 million. Debt rose in January 2026, when Allison added a $1.2 billion term loan due 2033 and drew on its revolver to pay for the Off-Highway business. Allison repaid more than $400 million of debt in the first nine months of 2026. At September 30, 2026, $996 million was available under the revolver until January 2, 2031, and debt due within 12 months was $20 million. In June 2026, it refinanced about $508 million of term loans at a lower margin. Interest cover is operating income divided by net interest expense for the first nine months of 2026. On November 2, 2026, Allison raised its 2026 guidance to adjusted EBITDA of $1,530 million to $1,580 million and adjusted free cash flow of $850 million to $900 million. In Q3 2026, it paid a quarterly dividend of $0.29 per share, bought back $57 million of stock and had $1,068 million left under its share repurchase program. As of Sep 30, 2026.
- Checkpoints
- Nov 2, 2026: Q3 2026 earnings: truck demand and Off-Highway margin. Failed. Watch: Results on track for the raised 2026 guidance and a higher Off-Highway margin than the 15% of Q2 pass; a cut to the guidance fails. Outcome: Allison raised its 2026 guidance again on record legacy sales, but the Off-Highway adjusted EBITDA margin fell to 13%, below the 15% of Q2 that the test asked to beat. Feb 2, 2027 (estimate): Q4 2026 results and 2027 guidance: synergies and debt. Pending. Watch: 2027 guidance for higher adjusted EBITDA and lower net debt passes; guidance for lower adjusted EBITDA because of weaker truck demand fails.
- Recent events
- Nov 2, 2026: Allison reported Q3 2026 results and raised its 2026 guidance for the second quarter in a row. Net sales rose 121% to $1,534 million with the Off-Highway business, and the Allison Transmission unit had record net sales of $881 million, up 27%. Diluted EPS was $2.30, and adjusted diluted EPS was $2.90, up 59%. Adjusted EBITDA rose 56% to $400 million, and adjusted free cash flow was $278 million. Allison has repaid more than $400 million of debt in 2026, and it bought back $57 million of stock in Q3. The new 2026 guidance is net sales of $5,975 million to $6,075 million, adjusted EBITDA of $1,530 million to $1,580 million and adjusted free cash flow of $850 million to $900 million. Oct 19, 2026: Allison said that it will report Q3 2026 results after the market closes on November 2, 2026, with a call at 5:00 p.m. Eastern Time. Aug 3, 2026: Allison reported Q2 2026 results. Net sales rose 92% to $1,566 million with the Off-Highway business. Diluted EPS was $2.15 and adjusted diluted EPS was $2.73, up 8%. Adjusted EBITDA rose 29% to $404 million, and adjusted free cash flow was a record $281 million. Allison repaid the remaining $150 million on its revolver and raised its 2026 guidance. Jun 11, 2026: Allison refinanced about $508 million of term loans due March 13, 2031, and lowered the interest margin on these loans by 0.25%. Feb 23, 2026: Allison reported 2025 results. Net sales were $3 billion, net income was $623 million and adjusted EBITDA was $1,130 million, or 37.5% of net sales. Defense net sales rose 26% to $267 million. Jan 2, 2026: Allison completed the purchase of Dana's Off-Highway business for $2.732 billion. To pay for it, Allison added a $1.2 billion term loan due 2033 and increased its revolving credit facility to $1 billion, now due January 2, 2031. Craig M. Price, the former head of Dana's Off-Highway business, became President of Allison Off-Highway.