About the only nice thing I can say about Allison Transmission's (NYSE:ALSN) performance since my last article
on the company is that the shares haven't done as poorly as many other
vehicle parts and components companies. Weak energy and
commodity-related markets have definitely done some damage to Allison's
business in the short term, and the company's progress with share growth
in areas like Class 8 metro and non-U.S. On-highway trucking has been
sluggish. Add into that the appearance of the North American trucking
market rolling over (including very weak Class 8 performance and
shrinking bus demand), and I can understand why investors have sold out
and moved on.
This is a tough time to consider buying Allison shares. I think the
company is well run, and I think the company's technology fits with a
growing focus on commercial vehicle powertrains as a source of improved
performance, as well as a growing difficulty in finding good commercial
drivers/operators familiar with manual transmissions. The catch is that
the Class 8 market is just starting a downturn, there aren't any real
signs of life in commodity-related businesses, and weak economic
performance in 2016 could start dragging down medium-duty truck
performance. I believe the long-term opportunities still support an
above-average revenue growth rate of around 4% and a share price in or
near the $30s, but there is definitely still risk that the 2016-2018
outlook deteriorates and takes the shares down with it.
Continue here:
Allison Transmission Hoping To Steer Around Declining Truck Orders
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