Why Allison Transmission Holdings (ALSN) Stock Is Down Today

NEW YORK (TheStreet) -- Allison Transmission Holdings  (ALSN) dipped Tuesday after the automatic transmission manufacturer announced an offering of common stock.

The company announced the sale of 25 million shares by investment funds affiliated with The Carlyle Group and Onex Corporation. The underwriter also has an option to purchase up to 3.75 million additional shares. The two sponsors are selling all the shares on the pro rata basis and both sponsors are existing stockholders of Allison Transmission. 

Allison Transmission will not receive any proceeds from the offering, which should close on or around April 25.

The stock was down 3.41% to $30.06 at 9:46 a.m. on Tuesday. More than 1.6 million shares had changed hands by that point to surpass the average volume of 1,046,690.

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Separately, TheStreet Ratings team rates ALLISON TRANSMISSION HLDGS as a "buy" with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ALLISON TRANSMISSION HLDGS (ALSN) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, good cash flow from operations, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Auto Components industry. The net income increased by 89.5% when compared to the same quarter one year prior, rising from $27.50 million to $52.10 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.8%. Since the same quarter one year prior, revenues slightly increased by 7.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has significantly increased by 80.25% to $98.60 million when compared to the same quarter last year. In addition, ALLISON TRANSMISSION HLDGS has also vastly surpassed the industry average cash flow growth rate of 4.94%.
  • Powered by its strong earnings growth of 86.66% and other important driving factors, this stock has surged by 37.72% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • ALLISON TRANSMISSION HLDGS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ALLISON TRANSMISSION HLDGS reported lower earnings of $0.88 versus $2.75 in the prior year. This year, the market expects an improvement in earnings ($1.16 versus $0.88).
  • You can view the full analysis from the report here: ALSN Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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