Allison Transmission Q2 Earnings Call Highlights

Allison Transmission Q2 Earnings Call Highlights

Allison Transmission reported strong second-quarter results , with sales up 92% year over year to $1.566 billion, adjusted EBITDA of $404 million and record adjusted free cash flow of $281 million. The company raised its 2026 outlook, including sales guidance of $5.8 billion to $6 billion.

Legacy transmission revenue reached a quarterly record, supported by 57% growth in defense sales, while the Off-Highway unit saw recovery in construction, material handling and mining. Allison also secured more than $50 million in annual run-rate off-highway awards and major defense contracts supporting long-term demand.

The company continues integrating the Off-Highway acquisition and targets $120 million in annual run-rate synergies by 2029. During the quarter, it repaid $150 million of debt, repurchased $46 million of stock and paid a $0.29-per-share dividend.

Allison Transmission NYSE: ALSN reported second-quarter 2026 net sales of $1.566 billion, up 92% from a year earlier, as the addition of its Allison Off-Highway business unit and growth in its legacy transmission operations lifted revenue. The company raised its full-year outlook, citing second-quarter performance and improving conditions across its end markets.

Adjusted EBITDA rose by $91 million year over year to $404 million, representing a 25.8% margin, while adjusted diluted earnings per share increased 8% to $2.73. Record quarterly adjusted free cash flow grew 84% to $281 million, Chief Financial Officer and Treasurer Scott Mell said.

“Cash generation remained exceptionally strong in the second quarter,” Mell said, adding that the company generated cash despite higher steel and aluminum costs and broader inflationary pressure. Allison expects to recover a substantial portion of higher commodity costs from customers through existing mechanisms, though the recovery occurs with a six- to 12-month lag.

Revenue in the Allison Transmission business unit increased 6% from a year earlier to a quarterly record of $860 million. Defense was a major contributor, with revenue in that end market rising 57% year over year to nearly $100 million. North American on-highway revenue increased 3%, driven primarily by pricing as volumes rose only slightly.

Chief Operating Officer Fred Bohley said North American on-highway revenue was up 15% sequentially in the second quarter, while all end markets in the transmission business unit increased more than 10% sequentially. The company expects further sequential improvement in medium-duty and Class 8 vocational truck volumes during the second half of 2026.

Management said end-user purchasing decisions remain influenced by geopolitical conditions, tariffs and emissions regulations. Chairman, President and CEO David Graziosi said OEMs and their suppliers are still assessing the Environmental Protection Agency’s proposal related to 2027 emissions requirements. He said the availability of 2026 engines is expected to help mitigate the effects of the proposed changes.

On pricing, Bohley said Allison has secured meaningful pricing since the pandemic and expects commercial pricing in 2027 to exceed the 50- to 75-basis-point annual pricing level the company historically achieved before the pandemic. He distinguished those commercial pricing expectations from commodity pass-through mechanisms.

The Allison Off-Highway business unit generated $706 million in second-quarter revenue. Management said construction, material handling and mining markets posted strong year-over-yea...