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Citigroup Upgraded Allison Transmission Holdings to a ‘Buy’

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Price movement

Allison Transmission Holdings (ALSN) has a market cap of $5.9 billion. It rose 0.37% and closed at $35.61 per share on January 26, 2017. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 5.4%, 4.3%, and 5.7%, respectively, on the same day. Allison Transmission is trading 5.1% above its 20-day moving average, 6.2% above its 50-day moving average, and 21.5% above its 200-day moving average.

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Related ETF and peers

The Guggenheim Mid-Cap Core ETF (CZA) invests 0.59% of its holdings in Allison Transmission. CZA’s YTD price movement was 3.2% on January 26.

The market caps of Allison Transmission’s competitors are as follows:

  • Caterpillar (CAT) – $56.8 billion
  • Cummins (CMI) – $24.7 billion
  • Thor Industries (THO) – $5.7 billion

Allison Transmission’s rating

Citigroup upgraded Allison Transmission Holdings’ rating to a “buy” from “neutral.”

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Performance in 3Q16

Allison Transmission reported 3Q16 net sales of $434.3 million—a fall of 11.9% compared to $493.0 million in 3Q15. The company’s gross profit margin fell by 80 basis points, while its operating margin rose by 120 basis points in 3Q16—compared to 3Q15.

Its net income fell to $44.6 million in 3Q16—compared to $46.5 million in 3Q15. It reported EPS (earnings per share) of $0.27 in both 3Q16 and 3Q15. It reported adjusted EBITDA[1. earnings before interest, tax, depreciation, and amortization] of $150.5 million in 3Q16—a fall of 13.6% compared to 3Q15.

Allison Transmission’s cash and cash equivalents fell 34.5%, while its inventories rose 10.2% between 3Q16 and 4Q15. It reported adjusted free cash flow of $115.5 million in 3Q16—a fall of 21.8% compared to 3Q15.

Projections

Allison Transmission made the following projections for 2016:

  • net sales to fall 8.5%–9.5%
  • adjusted EBITDA margin of 34.0%–35.0%
  • adjusted free cash flow of $435.0 million–$455.0 million

Next, we’ll look at Tenneco (TEN).

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