Results: Allison Transmission Holdings, Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

Allison Transmission Holdings, Inc. (NYSE:ALSN) investors will be delighted, with the company turning in some strong numbers with its latest results. Results were good overall, with revenues beating analyst predictions by 2.1% to hit US$816m. Statutory earnings per share (EPS) came in at US$2.13, some 5.1% above whatthe analysts had expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Allison Transmission Holdings

Following last week's earnings report, Allison Transmission Holdings' ten analysts are forecasting 2024 revenues to be US$3.16b, approximately in line with the last 12 months. Statutory per-share earnings are expected to be US$7.93, roughly flat on the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of US$3.13b and earnings per share (EPS) of US$7.70 in 2024. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target rose 6.0% to US$88.50, suggesting that higher earnings estimates flow through to the stock's valuation as well. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Allison Transmission Holdings at US$128 per share, while the most bearish prices it at US$67.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Allison Transmission Holdings' revenue growth is expected to slow, with the forecast 2.7% annualised growth rate until the end of 2024 being well below the historical 4.9% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.4% per year. Factoring in the forecast slowdown in growth, it seems obvious that Allison Transmission Holdings is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Allison Transmission Holdings following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that in mind, we wouldn't be too quick to come to a conclusion on Allison Transmission Holdings. Long-term earnings power is much more important than next year's profits. We have forecasts for Allison Transmission Holdings going out to 2026, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for Allison Transmission Holdings that we have uncovered.

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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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