Allison Transmission’s second quarter results were met with a negative market reaction as investors reacted to management’s cautious outlook for the rest of the year. While the company’s revenue and non-GAAP profit came in slightly ahead of Wall Street expectations, CEO David Graziosi cited ongoing softness in North America On-Highway demand, noting, “We probably haven’t seen anything quite like that in several years,” referencing recent OEM layoffs, shift reductions, and extended shutdowns. Strength in defense and international markets partially offset these headwinds, but a sharp decline in the Global Off-Highway segment weighed on overall performance.
Is now the time to buy ALSN? Find out in our full research report (it’s free).
Allison Transmission (ALSN) Q2 CY2025 Highlights:
- Revenue: $814 million vs analyst estimates of $800 million (flat year on year, 1.7% beat)
- Adjusted EPS: $2.25 vs analyst estimates of $2.22 (1.4% beat)
- Adjusted EBITDA: $313 million vs analyst estimates of $297.3 million (38.5% margin, 5.3% beat)
- The company dropped its revenue guidance for the full year to $3.13 billion at the midpoint from $3.25 billion, a 3.8% decrease
- EBITDA guidance for the full year is $1.16 billion at the midpoint, below analyst estimates of $1.17 billion
- Operating Margin: 31.4%, in line with the same quarter last year
- Market Capitalization: $7.63 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Allison Transmission’s Q2 Earnings Call
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Rob Wertheimer (Melius Research) asked about inorganic growth opportunities post-acquisition. COO G. Frederick Bohley said the Dana deal will enable further bolt-on acquisitions, with immediate focus on integration and cost synergies, but also organic growth from the expanded global footprint.
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Ian Zaffino (Oppenheimer) questioned the drivers behind the revenue guidance cut and implications of new tax legislation. CEO Graziosi pointed to significant revisions in North America On-Highway build rates, while CFO Scott Mell said the One Big Beautiful Bill Act will provide a “substantial” one-time cash tax benefit this year.
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Kyle Menges (Citi) sought details on margin guidance and pricing expectations. Mell stated that strong pricing should continue into the second half, but lower volumes and tariffs will weigh on margins, with most cost increases ultimately passed through to customers.
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Tim Thein (Raymond James) probed on the decremental margin impact from North America weakness and potential offsets. CEO Graziosi cited defense and international gains as partial mitigants, with municipal truck demand holding up better than medium-duty segments.
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Angel Castillo (Morgan Stanley) asked about order backlogs and 2026 demand visibility. CEO Graziosi described current weakness as deferred demand, not lost sales, and stated Allison’s portfolio is well-positioned for future regulatory changes, with products already compliant with evolving emissions standards.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team is focused on (1) evidence of stabilization or improvement in North America On-Highway demand and inventory normalization, (2) progress in integrating Dana’s Off-Highway business and realizing projected cost synergies, and (3) continued momentum in defense and international markets. We are also tracking the impact of tariffs, regulatory shifts, and customer investment cycles as key factors influencing Allison’s performance.
Allison Transmission currently trades at $90.73, up from $88 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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