Core Viewpoint - Wealth Oklahoma has initiated a new position in Allison Transmission Holdings by acquiring 75,606 shares valued at approximately $6.4 million, representing 1.9% of its reportable U.S. equity assets as of Q3 2025 [1][2][3]. Company Overview - Allison Transmission designs and manufactures fully automatic transmissions and related parts for commercial, defense, and specialty vehicles, generating revenue primarily through product sales to original equipment manufacturers (OEMs) and aftermarket services [5][8]. - The company reported trailing twelve-month (TTM) revenue of $3.2 billion and net income of $762 million for the period ended June 30, 2025 [3][4]. Financial Performance - As of October 10, 2025, Allison Transmission's dividend yield was 1.3%, and shares were priced at $81.02, which is 35% below their 52-week high as of October 9, 2025 [3][4]. - The company's revenue for the first half of 2025 was $1.58 billion, a slight decrease from $1.61 billion in 2024 [9]. - Allison Transmission has revised its 2025 revenue expectations to between $3.1 billion and $3.2 billion, down from a previous estimate of $3.2 billion to $3.3 billion due to softness in demand in certain end markets [10]. Market Position - Allison Transmission is the world's largest manufacturer of medium and heavy-duty fully automatic transmissions, leveraging a broad distribution network and long-standing OEM relationships [9][11]. - The company serves a global customer base, focusing on commercial vehicle and defense markets [6][8]. Investment Rationale - Wealth Oklahoma's acquisition of Allison Transmission shares is seen as a strategic move, reflecting confidence in the company's potential recovery, especially following its recent acquisition of Dana Incorporated, which enhances its drivetrain and propulsion systems capabilities [11]. - With a price-to-earnings ratio of 9, Allison Transmission's valuation appears attractive, indicating a potential buying opportunity [12].

Core Insights - Allison Transmission has successfully integrated its 4500 Rugged Duty Series (RDS) fully automatic transmission with the Cummins X15N natural gas engine in Kenworth T880 tractors, setting a new standard for sustainable heavy-duty transportation [1][2] Group 1: Product Integration and Performance - The integration of the Allison 4500 RDS transmission with the Cummins X15N engine demonstrates a commitment to sustainability while enhancing operational performance [3][5] - The X15N engine features a broader torque curve, providing better low-end torque and improved drivability, especially in challenging conditions [5] - The combination of the X15N engine, which delivers 500 horsepower and 1850 pounds per foot of torque, with the Allison 4500 RDS transmission showcases advanced capabilities without compromising performance [5][6] Group 2: Sustainability and Efficiency - Ozinga Renewable Energy Logistics has validated the use of natural gas-powered vehicles, emphasizing the reduction of emissions and enhancement of fleet performance [3][4] - The lighter weight of the X15N engine, along with the optimized performance of the 4500 RDS transmission, increases payload capacity and reduces total cost of vehicle ownership, aligning with sustainability objectives [4] - The X15N engine can achieve a negative carbon footprint when using renewable natural gas, meeting customer demands for cleaner fuel alternatives [5] Group 3: Market Position and Offerings - Allison Transmission offers fuel-agnostic solutions, allowing customers to choose from diesel, electric, or natural gas propulsion systems [7] - The Allison 4500 RDS transmission is designed for heavy-duty tractor and vocational truck applications, ensuring reliability and durability [6] - Allison Transmission is a leading manufacturer of medium- and heavy-duty fully automatic transmissions, with a global presence and a wide range of applications [8]

Group 1 - BUNGE GLOBAL SA (BG) is an integrated global agribusiness and food company with a downward revision of almost 16.6% in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Avnet (AVT) is one of the world's largest distributors of electronic components and computer products, experiencing a downward revision of almost 10.8% in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Allison Transmission Holdings (ALSN) manufactures fully-automatic transmissions for medium and heavy-duty commercial and heavy-tactical U.S. defense vehicles, with a downward revision of 8% in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2]

Core Thesis - Allison Transmission Holdings, Inc. is viewed as a compelling value opportunity, trading below intrinsic value with a P/E ratio of 9x, EBITDA of 8.0x, and revenue multiple of 2.7x [2] Financial Performance - The company's core on-highway segment revenue declined from $456 million in Q2 2024 to $417 million in Q2 2025, while defense-related revenues grew by 47% [3] - Earnings improved due to modest reductions in cost of goods sold (COGS), selling, general and administrative (SG&A) expenses, and research and development (R&D) expenses [3] Debt and Financial Flexibility - Allison carries significant leverage, with approximately 60% of enterprise value in debt, but most of this debt is long-dated with below-market interest rates, providing financial flexibility in a high-interest-rate environment [3] Strategic Acquisition - The company plans to acquire Dana Incorporated by Q4 2025, using a combination of cash and debt to expand its international footprint and enhance product offerings [4] - The acquisition is expected to generate synergies that will bolster cash flows over the medium term, despite potential near-term headwinds from integration costs and higher interest expenses [4] Competitive Advantages - Allison's durable competitive advantages include proprietary transmission technologies, strong brand equity, long-standing OEM integration, and a global aftermarket network, which create high switching costs and recurring revenue streams [5] - Multi-year defense contracts further enhance regulatory and contractual moats, limiting competition and providing a defensible market position [5] Valuation Potential - A simple discounted cash flow (DCF) analysis indicates an equity value of approximately $12.8 billion, suggesting a potential upside of roughly 75% [4]

Core Insights - Allison Transmission has introduced its Neutral at Stop fuel-saving technology as a standard feature on Kenworth and Peterbilt models equipped with the Allison 4700 Rugged Duty Series transmissions, aimed at enhancing fuel efficiency and reducing operating costs for commercial fleets [1][2][4] Group 1: Technology and Benefits - The Neutral at Stop technology improves vehicle efficiency by automatically shifting the transmission to neutral when the vehicle is stopped, which reduces engine load and fuel consumption [3] - This feature is part of Allison's FuelSense 2.0 package, which can achieve fuel savings of up to 6%, contributing to lower operating costs and a more sustainable operation [4] Group 2: Company Overview - Allison Transmission is a leading designer and manufacturer of propulsion solutions for commercial and defense vehicles, and is the largest global manufacturer of medium- and heavy-duty fully automatic transmissions [6] - The company has a presence in over 150 countries, with regional headquarters in the Netherlands, China, and Brazil, and manufacturing facilities in the USA, Hungary, and India [6]

Core Viewpoint - Allison Transmission's recent earnings report shows mixed results, with earnings per share beating estimates but revenues slightly declining year over year, raising questions about future performance [3][12]. Financial Performance - Q2 2025 earnings were $2.29 per share, exceeding the Zacks Consensus Estimate of $2.20, and reflecting a 7.5% increase year over year [3]. - Quarterly revenues totaled $814 million, a decrease of 0.2% from the previous year but above the Zacks Consensus Estimate of $794 million [3]. - Gross profit increased to $402 million from $394 million year over year, driven by price increases on certain products [8]. - Adjusted EBITDA rose to $313 million from $301 million reported a year ago [8]. Segmental Performance - North America On-Highway net sales fell 8.6% year over year to $417 million, missing the Zacks Consensus Estimate of $442 million due to lower demand for medium-duty trucks [4]. - Outside North America On-Highway net sales increased to $142 million from $128 million year over year, surpassing the Zacks Consensus Estimate of $123 million [5]. - Global Off-Highway net sales dropped to $16 million from $23 million year over year, missing the Zacks Consensus Estimate of $18.45 million [6]. - Defense end market net sales rose 46.5% year over year to $63 million, exceeding the Zacks Consensus Estimate of $52 million [6]. - Service Parts, Support Equipment & Other net sales grew 6% year over year to $176 million, beating the Zacks Consensus Estimate of $162 million [7]. Financial Position - Selling, general and administrative expenses increased by 24.4% year over year to $102 million [9]. - Cash and cash equivalents were $778 million as of June 30, 2025, down from $781 million at the end of 2024 [9]. - Long-term debt remained unchanged at $2.4 billion [9]. - Net cash provided by operating activities totaled $184 million, with adjusted free cash flow at $153 million, up from $150 million year over year [10]. 2025 Outlook - Full-year 2025 net sales are now expected to be between $3,075 million and $3,175 million, down from the previous estimate of $3,200 million to $3,300 million [12]. - Expected net income is revised to a range of $640 million to $680 million, down from $735 million to $785 million [12]. - Adjusted EBITDA is estimated to be between $1,130 million and $1,180 million, reduced from the earlier expectation of $1,170 million to $1,230 million [12]. - The company anticipates net cash provided by operating activities to be between $785 million and $835 million, down from the previous estimate of $800 million to $860 million [13]. Market Sentiment - There has been a downward trend in estimates revisions, with the consensus estimate shifting down by 12.88% [14]. - Allison Transmission currently holds a Zacks Rank 5 (Strong Sell), indicating expectations of below-average returns in the coming months [16].

Core Insights - Allison Transmission Holdings (ALSN) reported Q2 2025 earnings of $2.29 per share, exceeding the Zacks Consensus Estimate of $2.20 and reflecting a 7.5% year-over-year increase. Quarterly revenues reached $814 million, a slight decline of 0.2% from the previous year but surpassing the Zacks Consensus Estimate of $794 million [1]. Segmental Performance - In the North America On-Highway end market, net sales decreased by 8.6% year-over-year to $417 million, falling short of the Zacks Consensus Estimate of $442 million due to reduced demand for medium-duty trucks [2]. - The Outside North America On-Highway end market saw net sales rise to $142 million from $128 million in the same quarter of 2024, driven by increased demand in South America and Europe, and exceeded the Zacks Consensus Estimate of $123 million [2]. - Global Off-Highway end market net sales dropped to $16 million from $23 million year-over-year, missing the Zacks Consensus Estimate of $18.45 million due to weaker demand from energy, mining, and construction sectors outside North America [3]. - The Defense end market experienced a significant increase in net sales, rising 46.5% year-over-year to $63 million, driven by focused growth initiatives, and also surpassed the Zacks Consensus Estimate of $52 million [3]. - Net sales in the Service Parts, Support Equipment & Other end markets grew by 6% year-over-year to $176 million, attributed to higher demand for service parts and price increases, beating the Zacks Consensus Estimate of $162 million [4]. Financial Position - Gross profit for Allison Transmission was $402 million, up from $394 million in the previous year, primarily due to price increases on certain products [5]. - Adjusted EBITDA for the quarter was $313 million, an increase from $301 million reported a year ago [5]. - Selling, general and administrative expenses rose by 24.4% year-over-year to $102 million, while engineering and R&D expenses decreased to $44 million from $49 million [6]. - As of June 30, 2025, cash and cash equivalents stood at $778 million, a slight decrease from $781 million at the end of 2024, with long-term debt remaining unchanged at $2.4 billion [6]. - Net cash provided by operating activities totaled $184 million, and adjusted free cash flow was $153 million, up from $150 million in the previous year [7]. 2025 Outlook - The company revised its full-year 2025 net sales guidance to a range of $3,075-$3,175 million, down from the previous estimate of $3,200-$3,300 million. Net income expectations were also lowered to $640-$680 million from $735-$785 million [8]. - Adjusted EBITDA is now estimated to be between $1,130-$1,180 million, down from the earlier forecast of $1,170-$1,230 million [8]. - Expected net cash provided by operating activities is now between $785 million and $835 million, compared to the previous estimate of $800-$860 million, with capital expenditures projected in the range of $165-$175 million [9][10].

Group 1 - Allison Transmission (NYSE: ALSN) is the market leader in fully automatic transmissions with strong OEM relationships and high barriers to entry [1] - The company is acquiring Dana's Off-Highway segment at an attractive price, which is expected to enhance its market position [1] - The investment strategy focuses on companies with strong fundamentals that are undervalued due to short-term challenges, indicating a long-term investment horizon [1]

Core Insights - Brazil's modernization of student transportation is being supported by Allison Transmission through the delivery of microbuses equipped with advanced automatic transmissions, marking a significant step in the school bus market in South America [1][2] Company Overview - Allison Transmission is a leading designer and manufacturer of propulsion solutions for commercial and defense vehicles, recognized as the largest global manufacturer of medium- and heavy-duty fully automatic transmissions [8][9] - The company has a global presence in over 150 countries, with regional headquarters in the Netherlands, China, and Brazil, and manufacturing facilities in the USA, Hungary, and India [8][9] Industry Impact - The introduction of fully automatic transmissions in school buses is part of the Caminho da Escola Program, aimed at providing safer and more reliable transportation for public school students in Brazil [3][5] - The new buses are designed for rough terrain, ensuring that students traveling long distances on unpaved roads have access to education [3][4] Product Features - Allison's fully automatic transmissions enhance driving experience by eliminating manual gear shifts, reducing physical strain on drivers, and providing greater control in challenging driving conditions [4][6] - The design of Allison Automatics allows for continuous power delivery and a smooth driving experience, minimizing torque interruptions during gear shifts [6]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The financial statements for Q2 and H1 2025 show stable sales, increased net income, and higher operating cash flow, alongside significant stock repurchases [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and stockholders' equity increased slightly as of June 30, 2025, driven by current asset growth and a slight decrease in liabilities Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $1,587 | $1,538 | | **Total Assets** | $5,411 | $5,336 | | **Total Current Liabilities** | $472 | $506 | | **Total Liabilities** | $3,658 | $3,685 | | **Total Stockholders' Equity** | $1,753 | $1,651 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Q2 2025 net sales remained flat, while net income and diluted EPS increased for both the quarter and the six-month period Q2 and H1 2025 vs 2024 Performance (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $814 | $816 | $1,580 | $1,605 | | Gross profit | $402 | $394 | $780 | $760 | | Operating income | $256 | $263 | $505 | $497 | | Net income | $195 | $187 | $387 | $356 | | Diluted EPS | $2.29 | $2.13 | $4.50 | $4.05 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased in H1 2025, but significant cash was used for investing activities and substantially higher stock repurchases Six Months Ended June 30 Cash Flow Summary (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $365 | $344 | | Net cash used for investing activities | $(59) | $(32) | | Net cash used for financing activities | $(316) | $(218) | | **Net (decrease) increase in cash** | **$(3)** | **$93** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail revenue by market, the **$2.7 billion** Dana off-highway acquisition, and the impact of new U.S. tax legislation Disaggregated Revenue by End Market (in millions) | End Market | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | North America On-Highway | $417 | $456 | $852 | $876 | | Outside North America On-Highway | $142 | $128 | $254 | $243 | | Global Off-Highway | $16 | $23 | $34 | $69 | | Defense | $63 | $43 | $116 | $91 | | Service Parts, Support Equipment and Other | $176 | $166 | $324 | $326 | | **Total Net Sales** | **$814** | **$816** | **$1,580** | **$1,605** | - On June 11, 2025, the company agreed to acquire the off-highway business of Dana Incorporated for approximately **$2,732 million**, funded by cash and debt. The transaction is expected to close in late Q4 2025[87](index=87&type=chunk) - A new U.S. federal income tax law, the One Big Beautiful Bill Act (OBBBA), was enacted on July 4, 2025. It allows for immediate deduction of qualified capital investments and suspends the requirement to capitalize R&D expenditures. The company is currently evaluating its impact[90](index=90&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses flat Q2 sales, improved gross profit, the pending **$2.7 billion** Dana acquisition, and strong liquidity supporting operations and capital returns [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Q2 2025 net sales were flat, with strong Defense growth offsetting declines in North America On-Highway, leading to an improved gross profit margin of **49%** Q2 Net Sales by End Market (in millions) | End Market | Q2 2025 | Q2 2024 | % Variance | | :--- | :--- | :--- | :--- | | North America On-Highway | $417 | $456 | (9)% | | Outside North America On-Highway | $142 | $128 | 11% | | Global Off-Highway | $16 | $23 | (30)% | | Defense | $63 | $43 | 47% | | Service Parts, Support Equipment and Other | $176 | $166 | 6% | | **Total Net Sales** | **$814** | **$816** | **0%** | - Q2 2025 gross profit increased by **$8 million** YoY, driven by **$34 million** from price increases, which more than offset the impact of decreased sales volume and unfavorable material costs[117](index=117&type=chunk) - Selling, general and administrative expenses increased **24%** in Q2 2025, primarily due to costs related to the pending acquisition of Dana's off-highway business and higher product warranty expense[118](index=118&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$778 million** cash and **$745 million** credit, supporting operations, **$256 million** in stock repurchases, and a **$2 billion** acquisition bridge loan - As of June 30, 2025, total liquidity included **$778 million** in cash and cash equivalents and **$745 million** available under the Revolving Credit Facility[134](index=134&type=chunk)[139](index=139&type=chunk) - In H1 2025, the company returned significant capital to shareholders, repurchasing **$256 million** of its common stock, a substantial increase from **$83 million** in H1 2024[142](index=142&type=chunk)[147](index=147&type=chunk) - In connection with the pending acquisition of Dana's off-highway business, the company has entered into a commitment for a **$2 billion** bridge loan facility, which it expects to replace with permanent financing[141](index=141&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rates, foreign currency, and commodity prices, with sensitivity analyses showing potential impacts on net earnings - A **one-eighth percent** change in interest rates on the fully drawn Senior Secured Credit Facility would impact annual interest expense by approximately **$1 million**[156](index=156&type=chunk) - A **10%** aggregate change in the Chinese Yuan, Euro, Indian Rupee, and Japanese Yen would change net earnings by an estimated **$7 million** per year[158](index=158&type=chunk) - A **10%** price variation in aluminum and steel would change annual earnings by approximately **$8 million** and **$12 million**, respectively, assuming current purchase levels[160](index=160&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were **effective** as of the end of the period covered by the report[162](index=162&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[163](index=163&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, but management anticipates no material adverse effect on its financial condition or operations - The company is party to various legal proceedings but does not expect the outcomes to have a **material adverse effect** on its financial condition[79](index=79&type=chunk)[165](index=165&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) New risk factors relate to the pending Dana acquisition, including completion, financing, integration challenges, and realizing anticipated synergies - New risks have been added related to the pending acquisition of Dana's off-highway business[166](index=166&type=chunk) - Specific risks include: the acquisition may not be completed in a timely manner or at all; failure to obtain intended financing; potential loss of key personnel and disruption of business relationships; and challenges with successfully integrating the acquired business and realizing expected synergies[166](index=166&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[177](index=177&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q2 2025, the company repurchased **1,088,028** shares for **$102.5 million**, with **$1.26 billion** remaining authorized for future repurchases Common Stock Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining for Repurchase | | :--- | :--- | :--- | :--- | | April 2025 | 585,859 | $89.61 | $1,313,156,511 | | May 2025 | 297,720 | $100.76 | $1,283,159,528 | | June 2025 | 204,449 | $97.81 | $1,263,161,863 | | **Total Q2** | **1,088,028** | **$94.20** | **N/A** | [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) An officer terminated a Rule 10b5-1 trading arrangement for **6,300** shares on May 7, 2025 - On May 7, 2025, an officer of the company terminated a previously established Rule 10b5-1 trading plan for the sale of **6,300** shares[181](index=181&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) Key exhibits include the Stock Purchase Agreement for the Dana acquisition and required CEO/CFO certifications - Key exhibits filed with this report include the Stock Purchase Agreement for the Dana acquisition and CEO/CFO certifications (Exhibits **2.1**, **31.1**, **31.2**, **32.1**)[182](index=182&type=chunk)