Allison Transmission (NYSE:ALSN): How Does the New $97 Million Army Contract Shape Its Valuation?

Allison Transmission Holdings (NYSE:ALSN) has landed a $97 million contract to support the Abrams Main Battle Tank program. This agreement reinforces its longstanding relationship with the U.S. Army and its expertise in advanced drivetrain components.

See our latest analysis for Allison Transmission Holdings.

While Allison Transmission’s new Army contract underscores its reputation for engineering reliability, the share price hasn’t reflected the excitement lately, posting a 1-year total shareholder return of -15.2%. Still, long-term holders remain well ahead, with the 5-year total return up an impressive 146.8%. This recent dip could signal shifting risk perceptions. However, the company’s strong history of performance and milestone wins keep it on many investors’ watchlists.

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So with shares notably lagging despite this major defense contract, is Allison Transmission currently undervalued and due for a rebound? Or is the market already factoring in all its future growth potential?

Most Popular Narrative: 20.1% Undervalued

Compared to the last closing price of $82.29, the most widely followed narrative sees Allison Transmission Holdings as having significant room to run based on its fair value target. This valuation is driven by expected shifts in end markets, product innovation, and expansion opportunities.

The recently announced acquisition of Dana's Off-Highway business materially expands Allison's global footprint and diversifies its end markets to include agriculture and construction. It is also 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.

Eager to discover what’s fueling analyst optimism? The narrative’s pricing leans on forecasts of margin expansion and rising revenues as new markets come online. Which financial assumptions power this conviction—earnings strength, aggressive growth, or a new industry role? Only the full story reveals what truly drives this bold valuation.

Result: Fair Value of $103 (UNDERVALUED)

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

However, accelerating electrification and potential setbacks in North America's core truck market could challenge Allison's outlook and could quickly shift investor sentiment.

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

Build Your Own Allison Transmission Holdings Narrative

If you see things differently or value hands-on investigation, you can dig into the numbers and craft a narrative that is uniquely yours in just a few minutes, so why not Do it your way

A great starting point for your Allison Transmission Holdings research is our analysis highlighting 4 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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