Allison Transmission guides down hard for 2019

Key divisions softened sequentially

Allison Transmission Holdings (NYSE: ALSN) released its results for the fourth quarter of 2018 this evening after trading. ALSN is “the world’s largest manufacturer of fully automatic transmissions for medium- and heavy-duty commercial vehicles”, according to the release. The company expects net sales and net income to fall sharply in 2019.

Allison reported $647 million in net sales and $147 million in net income for the fourth quarter, but appeared not to release earnings-per-share numbers. It may be significant that Q4 sales numbers for North America On-Highway net sales were up six percent year-over-year but down nine percent sequentially, on lower demand for Rugged Duty Series and Pupil Transport/Shuttle Series models. 

The past year was a record year for Allison Transmission.

“I am pleased to report that 2018 was a record year for Allison Transmission,” said President and CEO David S. Graziosi. “Full year results exceeded our initial Net Sales guidance ranges across all of our end markets. Furthermore, Allison achieved record levels of Net Sales, Net Income, Adjusted EBITDA, Net Cash Provided by Operating Activities and Adjusted Free Cash Flow. Full year net sales growth of 20 percent was surpassed by even stronger growth in Net Income, up 27 percent, Diluted EPS, up 42 percent and Adjusted EBITDA, up 30 percent. And notably, double digit growth was realized in the Outside North America On-Highway end market for the third consecutive year.”

In addition to North America On-Highway, some core segments of the company’s product offerings fell off in the fourth quarter. ‘Defense’ end-market sales—and Allison makes transmissions for both tracked and untracked military vehicles—were down $9 million sequentially to $36 million in the fourth quarter, still up 44 percent year-over-year. Service parts and support equipment were also down nine percent sequentially, though that division was up seven percent YOY.

Allison is spending more on research and development, raising its investment to $37 million in the fourth quarter of 2018 from $31 million year-over-year, an increase of 19 percent.

The company issued full-year 2019 guidance, calling for net sales in the range of $2.58 billion to $2.68 billion. Those expectations compare negatively to net sales of $2.71 billion in 2018. Allison expects net income in 2019 to range from $535 million to $585 million, compared to $639 million in 2018.