Allison Transmission ((ALSN)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The latest earnings call from Allison Transmission painted a picture of robust financial health, marked by record net sales and strategic growth initiatives. Despite challenges such as a decline in adjusted EBITDA and free cash flow, as well as stagnant growth in the outside North America on-highway market, the company demonstrated resilient financial management with effective debt reduction and shareholder returns.
Record Net Sales and Revenue Growth
Allison Transmission reported an impressive all-time high in net sales, reaching $3.2 billion for 2024. This achievement was driven by a 15% increase in the North America on-highway market. Additionally, the defense end market experienced a significant 28% rise, culminating in $212 million in sales, while the outside North America on-highway market set a new record with $493 million.
Strong Financial Performance
The earnings report highlighted a record diluted EPS of $8.31, marking a 12% increase from the previous year. The fourth quarter alone saw a 3% year-over-year increase in net sales to $796 million, alongside a growth in gross profit to $373 million, showcasing Allison’s solid financial footing.
New Product Launches and Strategic Partnerships
In a move to expand its product offerings, Allison introduced the 6,000 series transmission for widebody dump trucks. The company also announced a strategic partnership with XCMG for the TerraTran transmission, specifically designed for the XG110 WBD trucks, indicating a forward-thinking approach to market needs.
Debt Reduction and Shareholder Returns
Demonstrating prudent financial management, Allison paid down over $100 million of its term loan debt, maintaining a net leverage ratio of 1.4x. The company also focused on rewarding shareholders, returning cash through dividends and share repurchases, with over $500 million of repurchase authorization still available.
Adjusted EBITDA Decline
The call revealed a slight decline in adjusted EBITDA for Q4 2024, which stood at $270 million compared to $277 million in the same quarter of the previous year. This drop highlights some operational challenges that the company is navigating.
Decreased Free Cash Flow
A decrease in adjusted free cash flow was noted, with figures falling to $136 million from $186 million year-over-year for the quarter. The decline was attributed to lower net cash from operating activities and increased capital expenditures.
Flat Guidance for 2025 Outside North America On-highway Market
Despite concerted efforts to increase market penetration, Allison anticipates flat growth in the outside North America on-highway market for 2025, reflecting a cautious outlook in this segment.
Forward-looking Guidance
Looking ahead, Allison Transmission provided a comprehensive guidance for 2025. The company projects net sales to range between $3.2 billion and $3.3 billion, buoyed by price realization and increased demand in vocational and track vehicle applications. Expected net income is between $735 million and $785 million, with adjusted EBITDA projected to be between $1.170 billion and $1.230 billion. Maintaining strong cash generation and strategic debt repayment, along with continued shareholder returns, remain focal points for the company.
In conclusion, Allison Transmission’s earnings call reflected a strong performance, underscored by record sales and strategic growth initiatives. While facing challenges such as a slight decline in adjusted EBITDA and flat growth projections outside North America, the company remains committed to financial discipline and shareholder value. With a forward-looking guidance that emphasizes robust demand and operational efficiency, Allison Transmission is poised for continued success in the coming year.
