Allison Reports Higher Fourth-Quarter Net Income as Revenue Dips
Allison Transmission Holdings Inc., the largest global provider of commercial-duty fully automatic transmissions, reported higher net income in its fourth quarter, based on various adjustments as sales fell 2% year-over-year.
Net Income for the quarter ended Dec. 31 was $61 million, or 36 cents per diluted share, compared with $13 million, or 8 cents, for the same period in 2015.
“Allison's fourth-quarter 2016 results exceeded the full-year guidance ranges we provided to the market on Oct. 24, principally due to stronger than anticipated demand conditions in North America off-highway service parts and global on-highway products,” Lawrence Dewey, Allison’s chairman and CEO, said in a statement.
The increase in net income principally was driven by a 2015 trade name impairment charge, adjustments for its interest rate derivatives and favorable product warranty adjustments, Indianapolis-based Allison said.
Net sales of $469 million in the fourth quarter of 2016 compared with $478 million in the same period in 2015. The decrease stemmed in large part from lower demand in the North America on-highway and global off-highway end markets partially offset by higher demand in the Outside North America On-Highway, Defense and Service Parts, Support Equipment & Other end markets.
North America on-highway end market net sales fell 14% to $217 million from the same period in 2015 amid lower demand for its rugged-duty and highway models, Allison said.
Outside of North America, on-highway end-market net sales were up 28% to $83 million from the same period in 2015, principally driven by higher demand in Europe, Japan and China, Indianapolis-based Allison said.
Service parts, support equipment and other end-market net sales of $108 million were up 14% from the same period in 2015 amid higher demand for North America off-highway service parts, it said.
Analysts seemed generally pleased with the results.
“Allison indicated that current inventory levels for Classes 6, 7 and 8 straight trucks in North America have improved since its 3Q16 earnings call, which is a positive read-through to our commercial truck coverage universe,” Neil Frohnapple, an analyst with Longbow Research, wrote in an investor note.
Allison “guided to up sales for six out of eight segments, which is material for a management team which is historically conservative," Credit Suisse analyst Jamie Cook wrote to investors. "In particular, ALSN seems more confident the HD and MD North American markets should grow and inventories at OE are now in check.”
“Given revenue tailwinds across the business, we expect a multiyear growth cycle to emerge for the first time as a public company,” Analyst David Leiker with R.W. Baird & Co., wrote in a note.
For the year, net income was $215 million, or $1.27, compared with $182 million, or $1.03, on sales of $1.84 billion, down from $1.98 billion a year earlier.
