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Allison Transmission Holdings, Inc. Just Beat EPS By 14%: Here's What Analysts Think Will Happen Next

Simply Wall St ·  {{timeTz}}

Allison Transmission Holdings, Inc. (NYSE:ALSN) defied analyst predictions to release its quarterly results, which were ahead of market expectations. It was overall a positive result, with revenues beating expectations by 5.4% to hit US$677m. Allison Transmission Holdings reported statutory earnings per share ( EPS ) US$1.30, which was a notable 14% above what the analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Allison Transmission Holdings

NYSE:ALSN Earnings and Revenue Growth April 30th 2022

Following the latest results, Allison Transmission Holdings' eleven analysts are now forecasting revenues of US$2.72b in 2022. This would be a solid 9.3% improvement in sales compared to the last 12 months. Per-share earnings are expected to ascend 12% to US$5.18. Before this earnings report, the analysts had been forecasting revenues of US$2.70b and earnings per share (EPS) of US$5.02 in 2022. So the consensus seems to have become somewhat more optimistic on Allison Transmission Holdings' earnings potential following these results.

There's been no major changes to the consensus price target of US$45.11, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation . Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Allison Transmission Holdings, with the most bullish analyst valuing it at US$80.00 and the most bearish at US$32.00 per share. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Allison Transmission Holdings' rate of growth is expected to accelerate meaningfully, with the forecast 13% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 0.6% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.4% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Allison Transmission Holdings to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Allison Transmission Holdings' earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Allison Transmission Holdings analysts - going out to 2024, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for Allison Transmission Holdings (1 makes us a bit uncomfortable!) that we have uncovered.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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