Core Viewpoint - Allison Transmission's recent earnings report shows a mixed performance with a decline in year-over-year earnings and revenues, but some segments exceeded expectations, indicating potential resilience in certain markets [3][4][5][6]. Financial Performance - Q4 2025 earnings were reported at $1.70 per share, beating the Zacks Consensus Estimate of $1.56, but reflecting a 15.4% decline year-over-year [3]. - Quarterly revenues totaled $737 million, down 7.4% from the previous year, yet surpassing the Zacks Consensus Estimate of $722 million [3]. - Gross profit decreased to $354 million from $373 million year-over-year, attributed to lower volumes and unfavorable material costs [7]. - Adjusted EBITDA for the quarter was $265 million, down from $270 million reported a year ago [7]. Segmental Performance - North America On-Highway net sales fell 13.8% year-over-year to $361 million but exceeded the Zacks Consensus Estimate of $335 million [4]. - Outside North America On-Highway net sales increased by 5.7% to $131 million, driven by higher demand in Europe, surpassing the Zacks Consensus Estimate of $125 million [4]. - Global Off-Highway net sales dropped to $12 million from $16 million year-over-year, but still beat the Zacks Consensus Estimate of $11.57 million [5]. - Defense end market sales rose 7.4% year-over-year to $73 million, although it missed the Zacks Consensus Estimate of $86 million [5]. - Service Parts, Support Equipment & Other net sales fell 5.3% year-over-year to $160 million, missing the Zacks Consensus Estimate of $167 million [6]. Financial Position - Cash and cash equivalents increased to $1.5 billion as of December 31, 2025, up from $781 million a year earlier [9]. - Long-term debt rose to $2.89 billion from $2.4 billion [9]. - Net cash provided by operating activities was $243 million, with adjusted free cash flow totaling $169 million, up from $136 million year-over-year [9]. 2026 Outlook - For full-year 2026, net sales are projected between $3,025 million and $3,175 million, compared to $3,010 million in 2025 [10]. - Expected net income ranges from $600 million to $750 million, compared to $623 million in 2025 [10]. - Adjusted EBITDA is anticipated to be between $1,365 million and $1,515 million, up from $1,130 million in 2025 [10]. - Operating cash flow is expected to be between $970 million and $1,100 million, compared to $836 million in 2025 [11]. - Projected capital expenditures are between $295 million and $315 million, with adjusted free cash flow expected between $655 million and $805 million, compared to $661 million in 2025 [11]. Market Sentiment - Recent estimates have shown a downward trend, with the consensus estimate shifting down by 9.58% [12]. - Allison Transmission has a subpar Growth Score of D and a Momentum Score of F, but a value grade of B, placing it in the top 40% for value investors [13]. - The stock holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return in the coming months [14].

Financial Data and Key Metrics Changes - Full year revenue decreased by 7% year-over-year, with adjusted EBITDA margin increasing by 140 basis points to 37.5% [12][14] - Net income for Q4 was $99 million, down from $175 million in the same period in 2024, primarily due to a $29 million impairment and $26 million in acquisition-related expenses [21][22] - Adjusted net income for Q4 was $141 million, with diluted earnings per share of $1.68 [21] Business Line Data and Key Metrics Changes - North American on-highway end market saw a sequential improvement of 10% from Q3 to Q4, despite year-over-year declines [20] - Defense end market revenue increased by 26% to $267 million for the full year, achieving the $100 million incremental annual revenue objective [13] - Record revenue of $507 million was achieved in the outside North American on-highway end market for the full year [20] Market Data and Key Metrics Changes - The defense end market showed strong growth, while the North American on-highway market remained soft, particularly in medium-duty trucks [20][72] - The company noted sluggish economic growth and uncertainties in global trade policies affecting performance [12] Company Strategy and Development Direction - The acquisition of Dana's Off-Highway Drive & Motion Systems business is expected to create a global leader with expanded market reach and product portfolio [6][7] - The company aims to leverage synergies from the acquisition, focusing on cost reduction and operational efficiencies [8][9] - Strategic investments in India are being made to support local production and partnerships, aligning with the Make in India framework [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating ongoing uncertainties and highlighted early signs of demand improvements in North America [13] - The company is focused on maintaining disciplined execution and seamless integration of the acquired business [10][60] - Management acknowledged the challenges posed by macroeconomic factors but remains optimistic about long-term growth opportunities [12][14] Other Important Information - The company repurchased $328 million of common stock, representing 4% of outstanding shares, and increased its quarterly dividend to $0.27 per share [14] - For 2026, the company provided guidance of consolidated net sales between $5.575 billion and $5.925 billion, with net income expected to range from $600 million to $750 million [25][26] Q&A Session Summary Question: Pricing expectations for 2026 and inflation impact - Management expects meaningful year-over-year pricing increases between 250 and 400 basis points, despite inflationary pressures [32][33] Question: EBITDA margin expectations for the acquired Off-Highway business - Management indicated that the Off-Highway business is expected to have an EBITDA margin of 11%-12% on $2.6 billion in revenues, with no one-time items assumed in guidance [38][39] Question: Synergies from the acquisition - Management confirmed that no synergies are embedded in the 2026 guidance, but they are confident in achieving the $120 million annual run rate of synergies over the next few years [48][88] Question: Margin profile for the legacy Allison business - Management believes that returning to peak EBITDA margins of 40% is feasible, depending on top-line growth and cost management [57][59] Question: End market guidance and recovery assumptions - Management remains cautious about recovery in Class 8 trucks and expects continued softness in the North American on-highway market [70][72]

Financial Data and Key Metrics Changes - Full year revenue decreased by 7% year-over-year, with adjusted EBITDA margin increasing by 140 basis points to 37.5% [12] - Net income for Q4 was $99 million, down from $175 million in the same period last year, primarily due to a $29 million impairment and $26 million in acquisition-related expenses [21] - Adjusted EBITDA margin for Q4 increased over 200 basis points to 36% despite a 7% decrease in net sales year-over-year [22] Business Line Data and Key Metrics Changes - Record revenue of $507 million achieved in the outside North American On-Highway end market for the full year [20] - Defense end market revenue increased by 26% to $267 million for the year, achieving the $100 million incremental annual revenue objective [13] - Q4 net sales in the defense end market were $73 million, up 7% year-over-year [20] Market Data and Key Metrics Changes - North America On-Highway end market showed a sequential improvement of 10% from the trough in Q3 2025, although year-over-year sales were down [20] - The company noted ongoing softness in the North American On-Highway market, particularly for medium-duty trucks, with no meaningful recovery expected for Class 8 vocational trucks [26] - The Off-Highway market is expected to remain at or near trough levels, with cautious optimism for gradual improvements [26] Company Strategy and Development Direction - The acquisition of Dana's Off-Highway business is expected to create a global leader with expanded market reach and a broader product portfolio [6][7] - The company aims to leverage its global footprint for local production and enhance product innovation through combined engineering capabilities [8] - Focus on seamless integration of the acquired business while maintaining disciplined execution and long-term value creation [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating ongoing uncertainties and highlighted early signs of demand improvements in North America [13] - The company remains focused on cost control and execution despite external macroeconomic headwinds [12] - Management anticipates capturing approximately $120 million in annual run rate synergies over the next few years [26] Other Important Information - The company repurchased $328 million of common stock, representing 4% of outstanding shares, and increased its quarterly dividend to $0.27 per share [14] - The 2026 guidance includes consolidated net sales in the range of $5.575 billion to $5.925 billion, with net income expected between $600 million and $750 million [25] Q&A Session Summary Question: Pricing expectations for 2026 and inflation impact - Management expects meaningful year-over-year pricing between 250 and 400 basis points, while facing substantial inflationary pressures [31][32] Question: EBITDA margin expectations for the acquired Off-Highway business - Management indicated that the Off-Highway business is expected to have an EBITDA margin of 11%-12% on $2.6 billion in revenues, with no one-time items assumed in the guidance [37][38] Question: Synergies from the acquisition - Management confirmed that no synergies are embedded in the 2026 guidance, with a focus on delivering the $120 million annual run rate of synergies over the next few years [46][85] Question: Margin profile for the legacy Allison business - Management believes that returning to peak EBITDA margins of 40% is achievable, contingent on top-line growth and cost management [54][56] Question: End market guidance and recovery expectations - Management remains cautious about recovery in Class 8 trucks and expects continued softness in the North American On-Highway market, while seeing growth in defense and international markets [68][70]

Q4 2025 Earnings Release February 23rd, 2026 Dave Graziosi – Chair, President & CEO Scott Mell – CFO & Treasurer Fred Bohley – Allison Transmission President & COO Craig Price – Allison Off-Highway President 1 Safe Harbor Statement The following information contains forward-looking statements. The words "believe," "expect," "anticipate," "intend," "estimate" and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-lookin ...

Core Insights - Allison Transmission is significantly expanding its operations and investment in India, aligning with the "Make in India" initiative and industrial modernization efforts [1][3] Group 1: Expansion and Investment - The company announced a $100 million expansion of its Chennai plant in October 2024, with initial production expected to begin in Q1 2026 and ramping to full capacity in 2027 [2][7] - This expansion is part of Allison's strategy to meet increasing global demand and solidify its role in India's industrial growth [7] Group 2: Strategic Partnerships - Allison has signed a Memorandum of Understanding with Armoured Vehicles Nigam Limited to establish a Maintenance, Repair and Overhaul center in India, supporting national security and modernization initiatives [3] - The company is collaborating with Precision Gasification Services Pvt. Ltd. to deploy a new well killing solution featuring the Allison 4700 Oil Field Series transmission, contributing to the energy sector [5] Group 3: Industry Impact - In the mining sector, Allison's technology is enhancing infrastructure development and resource extraction efficiency, with Shar Projects Private Limited expanding its fleet with Allison-equipped dump trucks [4][5] - Allison's transmissions are being integrated into Daimler India Commercial Vehicles' medium-duty trucks, which are exported to support regional transport needs in South Africa [6]

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $693 million, a decrease of 16% year-over-year, primarily due to lower demand for Class 8 vocational and medium-duty trucks in the North American on-highway end market [15][16] - Net income for the quarter was $137 million, down $63 million from $200 million in the same period of 2024, driven by lower gross profit and $14 million in acquisition-related expenses [15][16] - Adjusted EBITDA margin remained flat year-over-year at 37%, with adjusted free cash flow of $184 million in Q3 [7][16] Business Line Data and Key Metrics Changes - In the defense end market, net sales increased by 47% year-over-year, indicating strong growth initiatives [15] - The North American on-highway end market faced significant challenges, with a noted decline in demand impacting overall sales [6][15] Market Data and Key Metrics Changes - The North American on-highway market has been negatively affected by global macroeconomic factors, leading to cautious purchasing decisions from end users [6][7] - The company reported a sequential quarterly increase in cash of $124 million, ending Q3 with over $900 million in cash [8][16] Company Strategy and Development Direction - The company is focused on operational excellence, quality, and customer service while adapting to evolving market dynamics [7] - The acquisition of Dana's off-highway business is a strategic priority, aimed at enhancing growth opportunities [8][16] Management's Comments on Operating Environment and Future Outlook - Management expects the challenging operating environment to persist in the near term, with market activity likely to remain subdued until there is greater clarity around regulatory and economic factors [6][7] - The company views the current reductions in demand as a deferral of purchases rather than a permanent change in market size [7][24] Other Important Information - The company maintains a solid balance sheet with a net leverage ratio of 1.33 times and $1.65 billion in liquidity [16] - The company is actively working to close the acquisition of Dana's off-highway business, which is expected to enhance its market position [8][62] Q&A Session Summary Question: On-highway sales decline - The decline in on-highway sales was steeper than expected, influenced by various factors including channel inventory and end market demand [20][22] Question: Fourth quarter revenue expectations - The company anticipates a sequential improvement in revenues due to expected growth in the defense segment, despite challenges in the North American on-highway market [31][32] Question: Observations on market weakness - The weakness in market demand began to manifest early in Q3, leading to adjustments in SG&A and R&D spending [35][36] Question: Impact of tariffs - The company highlighted that 85% of its components are sourced from the U.S., Mexico, and Canada, mitigating the impact of tariffs [42][44] Question: Earnings growth outlook for next year - The company is focused on managing costs and pricing, but future earnings growth will depend on end-user demand recovery [46][48] Question: International on-highway growth targets - The company sees significant opportunities in international markets and believes the Dana acquisition will enhance its global footprint [58][62]

Q3 2025 Financial Performance - Net sales decreased by $131 million, a 16% decrease year-over-year, primarily due to lower sales in North America On-Highway, Global Off-Highway, Service Parts, Support Equipment & Other, and Outside North America On-Highway end markets, partially offset by higher sales in the Defense end market and price increases on certain products[17] - Net income decreased by $63 million, a 32% decrease year-over-year, to $137 million, principally driven by lower gross profit and acquisition-related expenses[14, 17] - Adjusted EBITDA decreased by $49 million, a 16% decrease year-over-year, to $256 million, driven by lower gross profit[14, 17] - Adjusted EBITDA margin was 36.9%, a decrease of 10 bps year-over-year, remaining essentially flat despite a challenging operating environment[14, 17] - Adjusted Free Cash Flow decreased by $26 million, a 12.4% decrease year-over-year, to $184 million, driven by lower net cash provided by operating activities and higher capital expenditures[14, 18] Segment Performance - North America On-Highway net sales decreased by 28% to $327 million, principally driven by lower demand for Class 8 vocational and medium duty trucks, partially offset by price increases and market share gains for hybrid propulsion systems for transit buses[16] - Outside North America On-Highway net sales decreased by 3% to $122 million, principally driven by lower demand in Asia, partially offset by higher demand in Europe[16] - Global Off-Highway net sales decreased by 65% to $7 million, principally driven by lower demand from the energy, mining and construction sectors outside of North America[16] - Defense net sales increased by 47% to $78 million, principally driven by increased demand for Tracked vehicle applications, price increases, and the continued execution of growth initiatives[16] - Service Parts, Support Equipment & Other net sales decreased by 5% to $159 million, principally driven by lower demand for aluminum die cast components and support equipment, partially offset by price increases[16]

Group 1 - Acadia Healthcare Company, Inc. (ACHC) has been added to the Zacks Rank 5 (Strong Sell) List due to a 4.9% downward revision in the consensus estimate for its current year earnings over the last 60 days [1] - Allison Transmission Holdings, Inc. (ALSN) is also on the Zacks Rank 5 (Strong Sell) List, with a 5.5% downward revision in the consensus estimate for its current year earnings over the last 60 days [2] - Black Stone Minerals, L.P. (BSM) has seen a 10.5% downward revision in the consensus estimate for its current year earnings over the last 60 days, leading to its inclusion in the Zacks Rank 5 (Strong Sell) List [2]

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]

Q2 2025 Performance - Net sales were $814 million, a 0% variance from Q2 2024 [19] - Gross profit increased by 2% to $402 million, driven by price increases, offset by lower volumes and unfavorable material costs [19, 22] - Net income increased by 4% to $195 million, primarily due to higher gross profit and unrealized mark-to-market adjustments [19, 22] - Adjusted EBITDA increased by 4% to $313 million, with an Adjusted EBITDA margin of 38.5%, a 160 basis points increase [19, 22] - Diluted earnings per share increased by 8% to $2.29, driven by higher net income and lower diluted shares outstanding [19, 22] End Market Performance - North America On-Highway net sales decreased by 9% to $417 million, due to lower demand for medium-duty trucks [21] - Outside North America On-Highway net sales increased by 11% to $142 million, driven by higher demand in South America and Europe [21] - Global Off-Highway net sales decreased by 30% to $16 million, due to lower demand from the energy, mining, and construction sectors outside North America [21] - Defense net sales increased by 47% to $63 million, driven by growth initiatives [21] - Service Parts, Support Equipment & Other net sales increased by 6% to $176 million, driven by higher demand for service parts and price increases [21] Dana Off-Highway Acquisition - The total transaction value is approximately $2.7 billion, representing 6.8x Adjusted EBITDA (LTM 12/31/24) of ~$400 million or 5.2x including estimated run-rate synergies of ~$120 million [13] - Expected net leverage of less than 3.0x at close with near-term target of less than 2.0x [13] - Anticipated closing in late Q4 2025 [13]