Allison Q2 Profit Jumps on Strength of On-Highway Sales

Medium-Duty, Vocational Class 8 Demand Drives Record Sales
Allison Transmission
A worker at Allison Transmission. The company posted record second-quarter sales of $783 million, an 18% increase from $664 million in the same period in 2022. (Allison Transmission)

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Allison Transmission Holdings Inc. reported net income of $175 million in the second quarter of 2023, up 43% compared with $122 million in the same period a year earlier, the company said.

Indianapolis-based Allison posted diluted earnings per share for the most recent quarter of $1.92, a 52% year-over-year increase from $1.26 per diluted share.

Automatic transmission manufacturer Allison posted record second-quarter sales of $783 million, an 18% increase from $664 million in the same period in 2022.

Both the EPS and sales total surpassed consensus analyst expectations, according to Zacks Equity Research. Zacks said the consensus EPS was $1.61 a share and the expected sales total was $741.1 million.

Allison’s second-quarter North American On-Highway sales totaled $397 million, a 17% increase compared with $340 million in the same period a year earlier.

The $57 million increase in net sales in the North America On-Highway end market division — Allison’s largest by revenue — was mostly driven by stronger customer demand for medium-duty and Class 8 vocational trucks and price increases on certain products, it said, without adding any more detail about the latter.

Allison expects medium-duty and Class 8 vocational truck sales to continue to be strong through the rest of 2024, executives said during the company’s earnings call July 27.

Allison CEO David Graziosi


“Overall, we see favorable demand dynamics continuing into the second half, but clearly some level of normalization relative to our [2022] performance … should be anticipated at this point,” CEO David Graziosi said.

Supply chain constraints have been resolved or are improved, but the system is not fully back to where it was, although it is better than it was a year ago and also six months ago, Allison’s top executive said.

“I think that is playing into the mindset of everybody adjusting to the new reality, which continues to be more variable, but it is improving,” Graziosi said. “Medium-duty, as you know, has been very undersupplied, so [truck original equipment manufacturers] are still catching up with that level of pent-up demand; vehicles are aging; as you know, lease rental is a big part of the medium-duty market, those fleets are getting pretty long in the tooth, they’re going to need to be replaced, so, certainly, we see medium-duty continuing to be pretty strong,”

The vocational market has underlying support too, he said, with drivers such as infrastructure spending and the number of trucks that have not been produced, so it continues to be a relatively strong market.


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Further down the line, Allison sees substantial opportunities in the introduction of engines fed by alternatives to diesel. Natural gas engines in particular, said Graziosi, with Cummins recently starting U.S. tests of a 15-liter model, the X15N, for the first time, are ripe for pairing with Allison’s strengths.

“[A natural gas engine] has some interesting attributes in terms of power density, so one of the things that it requires is ways that you can actually increase the power at the lower end, in terms of rpm performance, so what that actually requires is an Allison transmission — a fully automatic — that overcomes that lag if you have that sense of hesitation when you would try to accelerate,” he said.

“That is the advantage of a fully automatic, right. So, [as for] natural gas, we certainly view ourselves in an advantaged position relative to transmission solutions to pair with natural gas,” he added.

Allison also saw a $43 million or 31% year-over-year increase in sales for its Service Parts, Support Equipment and Other end market division to $181 million in the second quarter.

The company’s earnings were issued after the closing bell July 27. On July 28, Allison’s share price rose, trading around $1 higher than its prior close as the session progressed, having opened more than $2 higher. The July 28 open was marginally below the stock’s 52-week high, posted in the moments after the open.

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