Financial Analysis: Allison Transmission Holdings (NASDAQ:ALSN) versus PACCAR (PCAR)

Allison Transmission Holdings (NASDAQ: ALSN) and PACCAR (NASDAQ:PCAR) are both mid-cap industrials companies, but which is the better business? We will contrast the two businesses based on the strength of their earnings, profitabiliy, risk, valuation, analyst recommendations, institutional ownership and dividends.

Valuation and Earnings

This table compares Allison Transmission Holdings and PACCAR’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Allison Transmission Holdings $1.88 billion 3.00 $662.40 million N/A N/A
PACCAR $16.97 billion 1.43 $2.36 billion $4.05 17.00

PACCAR has higher revenue and earnings than Allison Transmission Holdings.

Analyst Ratings

This is a summary of current recommendations for Allison Transmission Holdings and PACCAR, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Allison Transmission Holdings 1 5 4 1 2.45
PACCAR 1 8 7 0 2.38

Allison Transmission Holdings presently has a consensus price target of $38.14, suggesting a potential upside of 2.98%. PACCAR has a consensus price target of $71.38, suggesting a potential upside of 3.65%. Given PACCAR’s higher possible upside, analysts clearly believe PACCAR is more favorable than Allison Transmission Holdings.

Dividends

PACCAR pays an annual dividend of $1.00 per share and has a dividend yield of 1.5%. Allison Transmission Holdings does not pay a dividend. PACCAR pays out 24.7% of its earnings in the form of a dividend.

Profitability

This table compares Allison Transmission Holdings and PACCAR’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Allison Transmission Holdings 16.63% 36.64% 7.93%
PACCAR 8.56% 19.13% 6.27%

Institutional and Insider Ownership

61.4% of PACCAR shares are owned by institutional investors. 2.6% of PACCAR shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

Allison Transmission Holdings beats PACCAR on 8 of the 15 factors compared between the two stocks.

Allison Transmission Holdings Company Profile

Allison Transmission Holdings, Inc. and its subsidiaries design and manufacture commercial and defense fully-automatic transmissions. The Company manufactures fully-automatic transmissions for medium- and heavy-duty commercial vehicles, and medium-and heavy-tactical United States defense vehicles. The Company’s transmissions are used in a range of applications, including on-highway trucks (distribution, refuse, construction, fire and emergency), buses (primarily school, transit and hybrid-transit), motorhomes, off-highway vehicles and equipment (energy, mining and construction) and defense vehicles (wheeled and tracked). The Company’s transmissions are sold under the Allison Transmission brand name and remanufactured transmissions are sold under the ReTran brand name. The Company has developed over 100 different models that were used in more than 2,500 different vehicle configurations and were compatible with over 500 combinations of engines, as of December 31, 2016.

PACCAR Company Profile

PACCAR Inc (PACCAR) is a technology company. The Company’s segments include Truck, Parts and Financial Services. The Truck segment includes the design, manufacture and distribution of light-, medium- and heavy-duty commercial trucks. The Company’s trucks are marketed under the Kenworth, Peterbilt and DAF nameplates. It also manufactures engines, primarily for use in the Company’s trucks, at its facilities in Columbus, Mississippi; Eindhoven, the Netherlands, and Ponta Grossa, Brazil. The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles. The Financial Services segment includes finance and leasing products and services provided to customers and dealers. Its Other business includes the manufacturing and marketing of industrial winches. The Company operates in Australia and Brazil and sells trucks and parts to customers in Asia, Africa, Middle East and South America.

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