Morgan Stanley Expects Solid 2Q14 Earnings From Allison Transmission

In a report published Thursday, Morgan Stanley analyst Nicole DeBlase reiterated an Equal-Weight rating and $35.00 price target on

. In the report, Morgan Stanley noted, “While a cyclical rebound in NA On- and Off-Highway could add to ALSN's EPS vs. current levels, we believe this will be partially offset by continued weakness in Defense, NA Hybrid, and to a lesser degree, Off-Highway (although we see the potential for some recovery in Energy). The most significant driver of potential earnings upside at ALSN is successful penetration of new geographies with FAT technology–and we believe that cultural preferences could continue to be a medium-term barrier. We do expect the company to have success penetrating new verticals within NA, albeit market share needs to reach ~50% before the earnings contribution becomes notable (30%+ vs. 2013 results).” Allison Transmission closed on Wednesday at $31.77.