Upcoming AWS Coverage on Autoliv Post-Earnings Results

LONDON, UK / ACCESSWIRE / February 23, 2017 / Active Wall St. announces its post-earnings coverage on Allison Transmission Holdings, Inc. (NYSE: ALSN). The Company disclosed its financial results for the fourth and full year fiscal 2016 (FY16) on February 06, 2017. The automatic transmission maker surpassed top- and bottom-line expectations and also announced a share repurchase agreement. Register with us now for your free membership at:

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One of Allison Transmission Holdings' competitors within the Auto Parts space, Autoliv, Inc. (NYSE: ALV), reported on February 02, 2017, its Q4 2016 financial results. AWS will be initiating a research report on Autoliv in the coming days.

Today, AWS is promoting its earnings coverage on ALSN; touching on ALV. Get our free coverage by signing up to:

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Earnings Reviewed

For the three months ended December 31, 2016, Allison reported net sales of $468.9 million, down 2% compared to net sales of $478.2 million in Q4 2015. The decline in net sales was attributed to lower demand in the North America On-Highway and Global Off-Highway end markets, which was partially offset by higher demand in the Outside North America On-Highway, Defense and Service Parts, Support Equipment & Other end markets. The Company's net sales numbers came in above analysts' consensus of $430.3 million.

Allison's gross profit for Q4 2016 was $217.7 million, down 2% compared to gross profit of $222.2 million in Q4 2015, driven by decreased net sales and higher incentive compensation expense partially offset by lower manufacturing expense commensurate with decreased net sales. The Company's gross margin for the reported quarter was 46.4%, a 10 basis points decline from a gross margin of 46.5% in the year earlier same quarter.

For Q4 2016, Allison's net income totaled $61.2 million, or $0.36 per diluted share, compared to $13.0 million, or $0.08 per diluted share, in Q4 2015. The increase was principally driven by a 2015 Trade Name Impairment charge, favorable mark-to-market adjustments for the Company's interest rate derivatives and favorable product warranty adjustments partially offset by decreased net sales and higher incentive compensation expense. The Company's earnings numbers surpassed Wall Street's expectations of $0.27 per share.

Allison's adjusted EBITDA for Q4 2016 totaled $158 million, or 33.8% of net sales, compared to $170 million, or 35.6% of net sales, for Q4 2015. The drop was attributed to higher incentive compensation expense and decreased net sales partially offset by favorable product warranty adjustments.

Sales Highlights

During Q4 2016, Allison's North America On-Highway end market net sales came in at $217 million, down 14% on a y-o-y basis principally driven by lower demand for Rugged Duty Series and Highway Series models. The Company's North America Hybrid-Propulsion Systems for Transit Bus end market net sales declined 13% on a y-o-y basis to $20 million due to engine emissions improvements and other alternative technologies.

During Q4 2016, Allison?s Outside North America On-Highway end market generated net sales of $83 million, up 28$ on a y-o-y basis, principally driven by higher demand in Europe, Japan, and China. The Company's Outside North America Off-Highway end market net sales declined 43% on a y-o-y basis to $4 million in the reported quarter driven by lower demand in the mining sector.

The Company's Q4 2016, Service Parts, Support Equipment & Other end market net sales increased 14% to $108 million in bolstered by higher demand for North America Off-Highway service parts.

For Q4 2016, Allison reported net cash provided by operating activities of $175.2 million compared to $174.8 million in Q4 2015. The Company's adjusted free cash flow for the reported quarter was $145.6 million compared to $147.0 million for the same period in 2015. The decrease was principally driven by higher incentive compensation expense, decreased net sales, and increased capital expenditures partially offset by favorable product warranty adjustments and increased incentive compensation accruals.

Share Repurchase Agreement

In a separate press release on February 06th, 2017, Allison announced that it has entered into a Stock Repurchase Agreement with ValueAct Capital Master Fund, L.P. and has entered into a Cooperation Agreement with Ashe Capital Management L.P. The Company also announced that William R. Harker of Ashe Capital will be nominated for election to the Company's board of directors at the Company's 2017 annual meeting of stockholders, taking the place of Gregory P. Spivy of ValueAct Capital, who has indicated that he will not stand for re-election.

Under terms of the Stock Repurchase Agreement with ValueAct Capital, Allison has agreed to repurchase 10,525,204 shares of the Company's common stock, which is all of ValueAct Capital's holdings in the Company, at a purchase price of $34.50 per share, representing aggregate consideration of approximately $363 million. In connection with the Company's repurchase of ValueAct Capital's stock, Mr. Spivy has notified the Company's board of directors that he will not stand for re-election at the 2017 annual meeting of stockholders.

Allison intends to fund the repurchase with cash on hand and borrowing under its revolving credit facility. The repurchase is being effected under the $1 billion common stock repurchase program authorized by the board of directors in November 2016.

2017 Guidance

Allison expects FY17 net sales to increase in the range of 1.5% to 4.5% compared to FY16. The Company is forecasting FY17 adjusted EBITDA margin in the range of 33.5% to 35.5% and an adjusted free cash flow in the range of $345 million to $385 million. Capital expenditures are expected to be in the range of $70 million to $80 million for the coming year, which includes maintenance spending of approximately $65 million. Cash income taxes are expected to be in the range of $55 million to $65 million for FY17.

For Q1 2017, Allison expects net sales to be approximately flat compared to the same period in 2016 principally driven by increased demand expected in the Service Parts, Support Equipment & Other end market offset by decreased demand expected in the North America On-Highway and North America Off-Highway end markets.

Stock Performance

On Wednesday, February 22, 2017, the stock closed the trading session at $37.11, marginally slipping 0.96% from its previous closing price of $37.47. A total volume of 600 thousand shares have exchanged hands. Allison Transmission Holdings' stock price surged 14.96% in the last three months, 34.08% in the past six months, and 65.75% in the previous twelve months. Moreover, the stock rallied 10.15% since the start of the year. The Company's shares are trading at a PE ratio of 29.34 and have a dividend yield of 1.62%.

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