BofA Securities has adjusted its price target for Allison Transmission Holdings Inc. (NYSE: ALSN) upward, now anticipating a value of $92.00 per share, an increase from its previous target of $77.00. This revision comes despite the firm maintaining an Underperform rating on the stock, reflecting measured caution despite strong recent share performance. Currently, Allison’s stock trades around $111.03, which InvestingPro Fair Value estimates suggest is marginally undervalued, particularly considering the stock has appreciated by 26.87% over the past six months.
The revision in price target aligns with Allison Transmission’s recent completion of its acquisition of Dana Incorporated’s Off-Highway business, which closed on January 2, following an initial expectation for completion in late Q4 of the prior year. This acquisition marks a significant expansion of Allison’s operations and revenue base.
BofA Securities projects that the Dana Off-Highway business will generate revenues exceeding $2.2 billion for Allison Transmission in 2026, assuming the Off-Highway market remains relatively flat. Additionally, the firm estimates adjusted EBITDA contributions around $340 million for the same period, factoring in expected synergies from the integration. For comparison, Allison reported revenue of $3.07 billion and EBITDA of $1.11 billion over the last twelve months, underpinned by a robust gross profit margin of 48.29%.
The investment firm's outlook has also been updated with respect to Allison’s On-Highway segment. It now expects the class 8 straight truck market to contract by 10% year-over-year, an improvement from an earlier projection of a 15% decline. Furthermore, the medium duty truck market is forecast to expand by 15%, revised upward from a previous estimate of 10% growth.
In the school bus sector, BofA anticipates an 11% increase in sales, up from a prior projection of 5%. Conversely, motor home markets are expected to decline by 30%, a moderated drop compared to an earlier forecast of a 40% decrease.
Supplementing these developments, Dana Incorporated has sold its Off-Highway business to Allison for $2.7 billion, enabling Dana to focus on its core competencies in light and commercial vehicle segments. Following the acquisition, Allison Transmission now commands a combined global enterprise with $5.5 billion in revenue across 29 countries.
The expanded portfolio enhances Allison’s capacity to serve a broad range of markets, including infrastructure, energy, agriculture, and national security. Additionally, Allison is augmenting its presence in India through strategic partnerships within defense and mining sectors. This includes a Memorandum of Understanding with Armoured Vehicles Nigam Limited to establish a Maintenance, Repair, and Overhaul (MRO) facility in the region.
In other analyst activity, Raymond James has recently upgraded Allison Transmission’s stock rating from Outperform to Strong Buy, citing favorable market circumstances.
To finance the acquisition, Allison issued $500 million in senior notes, utilizing these funds alongside existing resources to complete the purchase. These strategic maneuvers mark significant repositioning for both Allison and Dana in their respective markets.