Vocational Demand, Price Hikes Boost Allison Q1 Profit
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U.S. demand this year for Class 8 vocational trucks and day cab tractors that has tracked with expectations combined with a lift from higher prices helped boost Allison Transmission earnings in the first quarter of 2025.
Allison CEO David Graziosi told analysts May 1 that an expected surge in infrastructure spending early in 2025 has borne out, boosting the North American vocational market his company serves.
“We’re certainly well-positioned to supply the level of this market, which more or less [is] relatively flat on a year-over-year basis, consistent with what we had mentioned in February,” he said during Allison’s Q1 earnings call. “30% to 40% of our North America On-Highway business is with municipal customers. As we have demonstrated through previous economic cycles, this portion of our business is insulated from the macro environment, with municipalities continuing to buy amidst uncertainty.”
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Demand has been softer in the regional haul segment of the Class 8 tractor market, the transmission specialist said.“[The] regional haul series or basically the day cab tractor market, as I’m sure you’re aware, that forecast or forecasts that are out there for that particular market are relatively soft this year,” Graziosi told analysts. “So we’re pursuing our market share position there in terms of our regional haul series product. We don’t at this point anticipate significant dislocation issues.”
Allison Transmission posted net income in the first quarter of $192 million, an increase of $23 million or 13.6% from $169 million in the same period in 2024. Net sales for the most recent three-month period totaled $766 million, down $23 million or 2.9% from $789 million a year earlier. But Allison posted higher margins as a result of price increases and the vocational strength, the company said.
The Indianapolis-based company’s sales in the North American on-highway market rose 3.5% to $435 million from $420 million.
“The story of the quarter is fairly simple; Allison was left out of some of the extreme COVID price adjustments made by its truck [original equipment manufacturer] customers because of longer-term contracts. Those contracts have now rolled over, and Allison has strong price [levels] this year and for the next couple, effectively catching up,” Melius Research Founding Partner Rob Wertheimer said in a May 1 research note.
Wertheimer is positive about the coming quarters, too, even as analysts continue to revise their U.S. Class 8 demand forecasts due to economic uncertainty caused by tariffs while fleets remain cautious due to possible regulatory shifts.
“Allison’s markets should also avoid some of the risks and downturns seen in the rest of the North American trucking world. The vocational truck market is strong but never saw a sharp peak, in part because of supply chain constraints downstream of the truck itself, where body builders could not keep up with demand,” Wertheimer said. “While parts of the truck markets have a strong and very uncertain link to the consumer economy right now, vocational trucks basically do not.”
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He added, “Nothing is perfectly stable in this economy, but at the least vocational trucks have better ties to the more stable industrial and municipal parts of it.”
Allison’s Q1 operating profit received a $13 million bump since its Q1 2024 figures were affected by one-time signing incentives for unionized employees.
About 1,500 United Auto Workers ratified a four-year labor agreement on Jan. 16, 2024, after rebuffing an earlier deal between union and company negotiators in November 2023.
