Allison (ALSN) to Report Q2 Earnings: What’s in the Cards?

Allison Transmission Holdings, Inc. ALSN is slated to release second-quarter 2023 results on Jul 27 after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share and revenues is pegged at $1.59 and $743.03 million, respectively.

For the current quarter, the consensus estimate for Allison’s earnings per share has moved south by a cent in the past 30 days. Its bottom-line estimates imply growth of 26.19% from the year-ago reported number.

The Zacks Consensus Estimate for the company’s quarterly revenues suggests a year-over-year increase of 11.90%. Allison surpassed earnings estimates on three of the trailing four quarters and missed once, the average surprise being 12.84%. This is depicted in the graph below:

Allison Transmission Holdings, Inc. Price and EPS Surprise

Allison Transmission Holdings, Inc. price-eps-surprise | Allison Transmission Holdings, Inc. Quote

Q1 Highlights

Allison topped the Zacks Consensus Estimate of earnings and revenues in its first-quarter 2023 results.

Its adjusted earnings per share of $1.85 surpassed the consensus metric of $1.52 and rose 42% year over year.

Consolidated revenues came in at $741 million, up from $677 million in the corresponding quarter of 2022 and surpassed the Zacks Consensus Estimate of $715 million.

Factors at Play

Allison is facing a shortage of raw materials and electronic components, as well as logistics challenges, including air and ocean freight and port delays, labor constraints and high commodity costs, which are likely to have played a spoiler in the to-be-reported quarter.

The company’s electrified propulsion initiatives are expected to flare up the firm’s spending levels, thereby clipping cash flows. In 2022, the firm’s R&D costs increased 8.2% compared with the year-ago quarter, primarily driven by higher product initiative spending. High engineering – R&D expenses in the ongoing year to fund product development across all end markets are likely to have hurt margins in the quarter under review.

Here’s a sneak peek into our estimate of Allison’s segmental revenues.

For second-quarter 2023, we estimate North America On-Highway market revenue to be around $358 million, up from $340 million reported in the corresponding quarter of 2022. Our forecast for Outside North America On-Highway market revenue is $119 million, up from $105 million reported in the corresponding quarter of 2022. We expect North America Off-Highway market revenue to be around $23.7 million, up from $20 million reported in the corresponding quarter of 2022. We expect Outside North America Off-Highway market revenue to decline 2.9% year over year to $31.1 million, down from $32 million recorded during the second quarter of 2022. Our forecast for Defense market revenue stands at $35.5 million, up from $29 million reported in the corresponding quarter of 2022. We expect Service Parts, Support Equipment & Other revenue to settle at around $162 million, up from $138 million reported in the corresponding quarter of 2022.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Allison in the quarter to be reported, as it does not have the right combination of the two key ingredients. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here, as elaborated below.

Earnings ESP: Allison has an Earnings ESP of +0.11%. This is because the Most Accurate Estimate is pegged at par with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: ALSN currently sports a Zacks Rank #4 (Sell).

Stocks With the Favorable Combination

Let’s take a look at some players from the auto space that, according to our model, have the right combination of elements to post an earnings beat for the quarter to be reported:

Oshkosh Corporation OSK will release second-quarter 2023 results on Aug 1. The company has an Earnings ESP of +10.58% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Oshkosh’s to-be-reported quarter’s earnings and revenues is pegged at $1.62 per share and $2.24 billion, respectively. OSK surpassed earnings estimates once in the trailing four quarters and missed three times, the average negative surprise being 4.37%.

Lear Corporation LEA will release second-quarter 2023 results on Aug 1. The company has an Earnings ESP of +3.16% and a Zacks Rank #2.

The Zacks Consensus Estimate for Lear’s to-be-reported quarter’s earnings and revenues is pegged at $3.05 per share and $5.72 billion, respectively. LEA surpassed earnings estimates in all the trailing four quarters, the average surprise being 15.53%.

Magna International MGA will release second-quarter 2023 results on Aug 4. The company has an Earnings ESP of +1.06% and carries a Zacks Rank #2.

The Zacks Consensus Estimate for Magna’s to-be-reported quarter’s earnings and revenues is pegged at $1.25 per share and $10.17 billion, respectively. MGA surpassed earnings estimates in one of the trailing four quarters and missed thrice, the average negative surprise being 6.46%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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