Market Overview

Allison Transmission's Highest-Margin Segment Is 'Likely To Slow,' BofA Says In Downgrade

Allison Transmission's Highest-Margin Segment Is 'Likely To Slow,' BofA Says In Downgrade
Related ALSN
Earnings Scheduled For October 29, 2018
65 Biggest Movers From Yesterday

Slowing growth in Allison Transmission Holdings Inc. (NYSE: ALSN)’s bus and fracking parts segments could limit the company’s future upside, according to Bank of America Merrill Lynch.

The Analyst

BofA's Ross Gilardi downgraded Allison Transmision from Buy to Neutral and lowered the price target from $52 to $48.

The Thesis

Gilardi described Allison as a “best-in-class operator [that] is likely to participate in an evolving truck market” in a Thursday note. (See the analyst’s track record here.)

Allison is likely to experience strong growth in its "off-highway" businesses — oil and gas pressure pumping — and Class 8 truck production in the next year, the analyst said. 

But some of Indianapolis-based Allison's business segments are “near peak” and may struggle to find additional upside, Gilardi said. 

“ALSN’s Parts business, its highest-margin segment, has not reported double-digit growth in back-to-back years and is likely to slow from its robust pace," Gilardi said, adding that he only sees a modest upside to Allison shares going forward. 

Price Action

At the time of publication, shares of ALSN were trading down 3.6 percent at $41.75.

Related Links:

Analyst: WABCO Could Get A Boost From Tesla's Semi

Merrill Lynch: Tesla Semi Announcement Could Be A Reason To Buy Allison Transmission

Photo courtesy of Allison Transmission. 

Latest Ratings for ALSN

Nov 2018CitigroupMaintainsBuyBuy
Oct 2018BuckinghamMaintainsNeutralNeutral
Aug 2018Credit SuisseMaintainsOutperformOutperform

View More Analyst Ratings for ALSN
View the Latest Analyst Ratings

Posted-In: Analyst Color Downgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (ALSN)

View Comments and Join the Discussion!

Latest Ratings

View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Japan Delivers Dividend Growth

Canaccord: AAR To Benefit From Positive Inflections In Earnings, Free Cash Flow