Abstract

Allison Transmission will report fourth-quarter results on February 23, 2026, Post Market; this preview consolidates the latest company projections and market commentary to frame expectations for revenue, profitability, and adjusted EPS, alongside segment dynamics that could shape the print.

Market Forecast

Based on the company’s latest guidance set embedded in consensus-style projections, fourth-quarter revenue is estimated at $723.16 million, implying a year-over-year decline of 8.65%. Forecast EBIT stands at $191.67 million with a projected year-over-year contraction of 18.11%, and forecast EPS is $1.55, down an estimated 18.82% year over year. If margin color is consistent with recent trends, investors look for gross margin near the high 40% range and a net profit margin around the high teens; together these would point to a softer profit mix versus last year but still solid absolute profitability. The main business outlook is anchored by North America On-Highway and aftermarket/service, where demand normalization and mixed order cadence are expected to restrain top-line momentum. The most promising segment remains Defense, which, while smaller in revenue base, has backlog visibility and potential program deliveries that may support sequential stability even as broader markets soften.

Last Quarter Review

In the previous quarter, Allison Transmission reported revenue of $693.00 million, a gross profit margin of 47.47%, net profit attributable to shareholders of $137.00 million, a net profit margin of 19.77%, and adjusted EPS of $1.63; year over year, revenue declined by 15.90%, EBIT and adjusted EPS fell 21.54% and 28.19% respectively, indicating a weaker demand environment and unfavorable mix. Management sustained robust cash generation while maintaining premium gross margins near the high 40% level, highlighting cost discipline and pricing carryover despite lower volumes. Main business highlights showed revenue distribution led by North America On-Highway at $327.00 million, Services, Support & Other at $159.00 million, Outside North America On-Highway at $122.00 million, Defense at $78.00 million, and Global Off-Highway at $7.00 million, underscoring the continued dominance of North America freight and vocational exposure amid export softness.

Current Quarter Outlook (with major analytical insights)

Main on-highway driveline business: volume normalization and price/mix are in the driver’s seat

The on-highway driveline franchise, especially in North America, is poised to remain the central determinant of quarterly performance. Order rates in heavy- and medium-duty trucking have normalized from prior peaks as fleets adjust to freight rate pressures and elevated carrying costs, translating into lower build schedules versus last year’s unusually strong comparator. Pricing established in earlier cycles and a richer mix in vocational niches can partially offset the unit headwinds, but negative operating leverage typically weighs on EBIT as volumes ebb. We expect year-over-year revenue contraction in North America On-Highway to continue, with sequential resilience dependent on late-quarter dealer inventory movements; this dynamic is embedded in the forecasted 8.65% revenue decline and nearly 19% EBIT contraction. If commodity deflation and manufacturing efficiencies persist, gross margins near the high 40% range are achievable, though net margins may trend in the high teens as fixed-cost absorption diminishes.

Aftermarket, service, and parts: steady cash contributor with countercyclical traits

The Services, Support & Other business acts as a buffer in softer truck production environments because fleets increasingly rely on maintenance and repair as vehicle replacement cycles stretch. This segment’s revenue base of $159.00 million last quarter underscores its materiality and high-margin profile, supported by proprietary parts and diagnostic offerings that sustain recurring demand. For the quarter in view, modest growth or flattish performance versus last year appears plausible given utilization patterns and the installed base expansion from prior production cycles. While unlikely to offset on-highway OE declines entirely, a favorable aftermarket mix should support overall gross margin resilience, which is critical to sustaining double-digit net profitability even as EBIT declines on lower throughput.

Defense and specialized applications: smaller base but higher visibility and margin potential

Defense, at $78.00 million last quarter, remains a smaller contributor but holds disproportionate strategic significance because program deliveries can be lumpy yet margin-accretive. The current environment features heightened replacement and upgrade cycles across certain Western platforms, offering a backdrop of backlog-led stability relative to cyclical commercial markets. In the upcoming print, we look for this segment to provide a sequentially stable to slightly improved revenue contribution, with potential upside if scheduled shipments cleared at quarter-end. Even modest outperformance in Defense could cushion consolidated margins and help limit the year-over-year EPS decline closer to the forecasted 18.82%, particularly if on-highway volumes surprise to the downside.

Key stock drivers this quarter: production schedules, price-cost spread, and cash deployment

Three factors are most likely to influence the share reaction. First, production schedules and order intake updates for North America Class 4–8 markets will shape the revenue trajectory into the first half of 2026; any commentary on improving order trends or reduced dealer inventories would help recalibrate expectations for the top line. Second, the price-cost spread—especially the persistence of realized pricing versus moderating materials and logistics costs—will dictate whether gross margin can remain near the high 40% range despite operating deleverage. Third, cash deployment plans, including buybacks and capital allocation to new product introductions or electrified solutions, can support per-share metrics even in a flat-to-down revenue year. A tighter rein on working capital alongside disciplined capex should preserve free cash flow, providing optionality if end-market demand remains choppy.

Analyst Opinions

Among recently published views in the period under review, the prevailing tone from institutional commentary is cautious, with a majority expecting year-over-year declines in revenue and EPS consistent with the company’s outlook for a softer demand environment. Several analysts highlight the normalization in North America truck production as a primary headwind to volumes and operating leverage, while acknowledging that aftermarket/service and Defense could cushion margins. The consensus profile embedded in forecasts—revenue down roughly 8%–9% and EPS down near 19%—reflects this guarded stance, suggesting limited catalysts for a near-term beat barring better-than-expected order intake or mix improvements. We align with the cautious majority view and emphasize monitoring management’s qualitative color on orderbooks and dealer inventory balances for signs of a bottoming trajectory.