It's been a mediocre week for Allison Transmission Holdings, Inc. (NYSE:ALSN) shareholders, with the stock dropping 12% to US$102 in the week since its latest yearly results. Allison Transmission Holdings reported in line with analyst predictions, delivering revenues of US$3.2b and statutory earnings per share of US$8.31, suggesting the business is executing well and in line with its plan. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Allison Transmission Holdings

Following last week's earnings report, Allison Transmission Holdings' ten analysts are forecasting 2025 revenues to be US$3.28b, approximately in line with the last 12 months. Statutory earnings per share are predicted to rise 5.7% to US$8.92. In the lead-up to this report, the analysts had been modelling revenues of US$3.38b and earnings per share (EPS) of US$9.37 in 2025. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a small dip in earnings per share estimates.

Despite the cuts to forecast earnings, there was no real change to the US$110 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Allison Transmission Holdings at US$129 per share, while the most bearish prices it at US$74.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Allison Transmission Holdings' revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 1.8% growth on an annualised basis. This is compared to a historical growth rate of 7.6% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 4.4% annually. Factoring in the forecast slowdown in growth, it seems obvious that Allison Transmission Holdings is also expected to grow slower than other industry participants.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Allison Transmission Holdings. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Allison Transmission Holdings going out to 2027, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Allison Transmission Holdings , and understanding this should be part of your investment process.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.