Allison Transmission (ALSN): Exploring Valuation After Weaker Q3 Results and Revised 2025 Outlook

Allison Transmission Holdings (ALSN) released its third-quarter results, which missed expectations and led the company to lower its guidance for the rest of 2025. Investors reacted as most segments saw weaker demand, although the Defense segment experienced strong growth.

See our latest analysis for Allison Transmission Holdings.

The company’s weaker results rattled investors, sending Allison Transmission’s share price lower for the year so far, with a year-to-date price return of -18% and a one-year total shareholder return of -23%. Longer-term holders, however, are still well ahead. They have benefited from a 133% total return over five years as momentum continued with the company’s ongoing growth track record.

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With Allison’s shares trading at a notable discount compared to analyst targets, but recent results raising questions, the key issue is whether the current price reflects future challenges or if a potential buying opportunity is emerging for long-term investors.

Most Popular Narrative: 11.5% Undervalued

The most widely followed narrative puts Allison Transmission Holdings' fair value at $100.20—more than 11% above the last closing price of $88.66. With the latest valuation reflecting optimism around long-term catalysts and operational improvements, the narrative sets up a compelling debate on what is fueling the upside.

The recently announced acquisition of Dana's Off-Highway business materially expands Allison's global footprint, diversifies its end markets to include agriculture and construction, and is expected to drive significant operational and cost synergies ($120 million annual run rate), supporting both revenue growth and margin enhancement over the next 4 years.

Read the complete narrative.

Curious how this acquisition could transform the future for Allison? One financial assumption dominates the narrative and underpins the bullish price target, but it is far from business as usual. Want to know what game-changing forecast makes this valuation stand out? Click in to get the full story, including the bold estimates shaping analyst thinking.

Result: Fair Value of $100.20 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, accelerating electrification trends and prolonged softness in the North American on-highway segment could challenge Allison’s earnings power. This may potentially shift the narrative for investors.

Find out about the key risks to this Allison Transmission Holdings narrative.

Build Your Own Allison Transmission Holdings Narrative

If you want to challenge these views or see what the numbers say from your own perspective, you can put together your own analysis in just a few minutes. Do it your way

A great starting point for your Allison Transmission Holdings research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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