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Allison Transmission Holdings Inc. reported gains in first-quarter net income while revenue rose 15% to post its strongest revenue quarter since 2019.
The company noted production continued to accelerate to meet resilient customer demand.
Net income for the period ended March 31 was $129 million, or $1.30 per diluted share, compared with $120 million, $1.07, a year earlier.
The increase was principally driven by higher gross profit partially offset by a $15 million unrealized loss on marketable securities, according to the company.
Revenue increased to $677 million compared with $588 million, which was also the third-strongest revenue quarter in Allison’s history.
Revenue also set a record in its outside North America on-highway end market — rising 30% to $109 million compared with $84 million in the 2021 period. It was driven by improving demand across all regions and the continued execution of growth initiatives
“Following a notable year in 2021, first quarter 2022 results continue to demonstrate momentum for Allison’s growth objectives,” Allison Chairman and CEO David Graziosi said in a release. “The Allison team continues to deliver solid execution and strong performance, despite persistent global supply chain challenges.”
During the first quarter, the Indianapolis-based company increased its quarterly dividend for the third consecutive year, to 21 cents from 19 cents per share.
Other revenue-related highlights in the quarter included:
- An 8% increase in net sales in the North America on-highway end market, its largest, principally driven by continued strength in customer demand for last-mile delivery, regional haul and vocational trucks. Revenue climbed to $346 million compared with $319 million a year earlier.
- A 14% increase in net sales in the service parts, support equipment and other end market principally driven by increased demand for North America service parts and global support equipment. Revenue increased to $139 million compared with $122 million a year earlier
- An 88% increase in net sales in the global off-highway end markets driven by improving demand for hydraulic fracturing applications in the energy sector as well as higher demand in the mining and construction sectors. Revenue increased to $30 million compared with $16 million in the 2021 period
- Revenue in its defense segment fell 22% to $35 million compared with $45 million a year earlier.
- Research and development expenses for the quarter were $43 million compared with $38 million for the same period in 2021. The increase was principally driven by increased product initiatives spending.
“During the first quarter, we also announced the start of production for Allison’s next-generation electronic controls platform built on decades of technology evolution and application experience and combined with a state-of-the-art microprocessor and software operating system,” Graziosi said during the earnings call. “This next-generation platform features advanced communications, functional safety, cybersecurity and over-the-air programming capability.”
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Allison affirmed the full-year 2022 guidance ranges released to the market in February. Allison expects 2022 revenue in the range of $2.6 billion to $2.7 billion, net income in the range of $430 million to $520 million, and capital expenditures in the range of $170 million to $180 million.
Its 2022 revenue guidance reflects higher demand in the global on-highway, global off-highway and service parts, support equipment and other end markets as a result of the ongoing global economic recovery, continued strength in customer demand and price increases on certain products, it noted.
As for the effect on the company from the war between Russia in Ukraine, Graziosi said, “In compliance and support of the actions taken by the United States and its allies, we have ceased all operations in Russia and associated regions. Russia and Ukraine accounted for less than 1% of Allison’s revenue in 2021. We do not have a manufacturing presence in the region nor any direct exposure, as it relates to sourcing of raw or direct material.”
Allison Transmission designs and manufactures vehicle propulsion systems for commercial and defense vehicles. It is the largest global manufacturer of medium- and heavy-duty fully automatic transmissions, and makes electrified propulsion systems.