On Wednesday, Oppenheimer has increased the stock price target for Allison Transmission (NYSE:ALSN) shares to $115 from the previous $90, while maintaining an Outperform rating. The adjustment follows Allison Transmission's impressive third-quarter performance, which surpassed both Oppenheimer's and the broader market's expectations.
The company reported an EBITDA of $305 million, which exceeded the anticipated figures of $277 million and $280 million from Oppenheimer and market consensus, respectively. Furthermore, Allison Transmission's revenue reached $824 million, outpacing the forecasts of $772 million and $790 million.
The strong quarterly results were primarily fueled by high demand in the North American and International On-Highway markets, as well as the Defense sector. Notably, sales in the North American On-Highway segment saw a year-over-year increase of 22%, bolstered by persistent demand for Class 8 vocational vehicles and medium-duty trucks, along with the implementation of price hikes.
Defense sales also experienced a significant uptick, with a 23% rise year-over-year, driven by the demand for tracked vehicle applications.
In response to the robust third-quarter earnings, Allison Transmission's management has revised its full-year 2024 guidance upwards. The company now expects sales to be in the range of $3,135 million to $3,215 million, compared to the previously projected $3,090 million to $3,170 million. The EBITDA forecast has also been adjusted to a new range of $1,115 million to $1,175 million, up from the initial estimate of $1,085 million to $1,145 million.
The price target increase by Oppenheimer to $115 from $90 reflects a positive outlook on Allison Transmission, particularly taking into account the favorable market conditions for the company's primary North American On-Highway end-market.
In other recent news, Allison Transmission has seen a slew of positive developments. The company reported impressive third-quarter results for 2024, exceeding expectations and leading to an upward revision of stock targets by both Baird and Citi.
Baird increased its price target from $103 to $108, citing strength in vocational demand, while Citi raised its target from $97 to $109, based on higher than anticipated North American on-highway revenue.
Allison Transmission also announced a strategic partnership with LiuGong, a global construction equipment manufacturer, aimed at addressing the needs of the Indonesian mining industry. This collaboration was marked by the unveiling of LiuGong's 70-ton DW105A Wide Body Dump Truck, equipped with Allison's 4800 Wide Body Dump Series transmission.
Furthermore, a Hyundai (OTC:HYMTF) Xcient hydrogen fuel cell truck, fitted with an Allison 4000 Series™ fully automatic transmission, successfully completed 30,000 kilometers of deliveries for GLS Germany. This marks a significant stride in the company's push towards environmentally friendly propulsion technologies.
Finally, the company declared a quarterly cash dividend of $0.25 per share for the third quarter of 2024, following a record-breaking revenue of $816 million in the second quarter. These are the latest developments in the ongoing story of Allison Transmission.
InvestingPro Insights
Allison Transmission's strong performance, as highlighted in the article, is further supported by data from InvestingPro. The company's impressive gross profit margin of 48.17% for the last twelve months as of Q2 2024 aligns with the InvestingPro Tip noting "Impressive gross profit margins." This robust profitability is likely contributing to the company's ability to exceed market expectations.
Additionally, the InvestingPro data shows a significant 1-year price total return of 99.06%, which correlates with the InvestingPro Tip indicating a "High return over the last year." This substantial stock performance underscores investor confidence in Allison Transmission's business model and growth prospects.
The company's P/E ratio of 12.94 supports another InvestingPro Tip that Allison Transmission is "Trading at a low P/E ratio relative to near-term earnings growth." This valuation metric suggests that the stock may still have room for growth, aligning with Oppenheimer's increased price target.
For investors seeking more comprehensive analysis, InvestingPro offers 15 additional tips for Allison Transmission, providing a deeper understanding of the company's financial health and market position.
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