Allison Transmission Holdings, Inc. (ALSN) Stock Analysis
Allison’s high-moat vocational franchise and defense growth support moderate upside, but Dana integration, leverage and electrification make execution the decisive investment variable.
Overview
Allison is the leading supplier of fully automatic medium- and heavy-duty vocational transmissions, combining a high-margin legacy franchise with Dana’s Off-Highway Drive & Motion Systems business acquired on January 1, 2026. The enlarged company serves OEMs, defense departments and aftermarket distributors across 29 countries, adding global exposure to infrastructure, agriculture, forestry, mining and energy. Historically, 2025 revenue was $3.01 billion, with 48.6% gross margin, 37.5% Adjusted EBITDA margin and $661 million of Adjusted FCF, although sales fell 6.7% amid weaker North American truck demand. Q2 2026 sales rose 92.4% to $1.566 billion, including $706 million from Dana, while Adjusted EPS beat estimates at $2.73. **Management raised 2026 revenue guidance to $5.80 billion–$6.00 billion and expects $745 million–$865 million of Adjusted FCF.** The key issue is margin dilution: consolidated gross margin fell to 32.9% because Off-Highway operates near 16.7% gross margin, while debt increased to $4.14 billion. At $127.00, the stock offers moderate scenario-weighted upside, with defense growth, $120 million of synergies and deleveraging as catalysts.