Allison Transmission Earnings: Company's Dominance in North America On-Highway Continues

Allison Transmission’s second quarter saw strong contributions from the firm’s key market of North American on-highway trucks. We raise our fair value estimate to $87 per share from $85 on the time value of money and a lower tax rate (19% instead of 21%) for 2024 and 2025 based on how 2024 is tracking. Diluted earnings per share rose 11% year over year to $2.13 and management cited unprecedented demand for Class 8 vocational vehicles. This strength and pricing increases, likely to continue, led to increased 2024 guidance for revenue, adjusted EBITDA, net income, and adjusted free cash flow. The midpoint for revenue is now $3.13 billion, up from $3.1 billion, and adjusted EBITDA’s midpoint is now $1.115 billion, up from $1.1 billion.