Analysis ALSN
Allison's truck rebound is bringing in cash. Where is it going?
The transmission maker lifted its annual cash forecast after buying Dana’s Off-Highway business. Debt repayment is sharing the proceeds with buybacks and dividends.
Allison generated $343 million of cash from operations in the third quarter of 2026, up from $228 million a year earlier. The recovery in its truck-transmission business is helping it repay borrowing after a major acquisition.
Group sales more than doubled to $1.534 billion in the quarter ended September 30, 2026. Much of that came from the Off-Highway business bought from Dana on January 1. Allison's existing transmission business grew 27%, to $881 million.
The truck comeback has a weak starting point
North American On-Highway sales reached $462 million, up 41% from a year earlier. Management attributed the increase to stronger demand for medium-duty and heavy vocational trucks, alongside price increases on some products.
Research by Ticker Byline shows that those sales were only about 1% above the same quarter in 2024. Last year's sharp decline makes the current rebound look especially large.
The recovery is producing profit as well as sales. The legacy transmission business earned $300 million of operating profit on $881 million of revenue. The acquired Off-Highway unit earned $32 million on $653 million of revenue, before separately reported central costs.
Management said mining demand remained strong in the acquired business, while agriculture and industrial demand stayed subdued. European summer holidays also weighed on its third-quarter sales.
More cash, with less capital spending expected
Allison now expects $850 million to $900 million of adjusted free cash flow for 2026, compared with $745 million to $865 million in August. Its definition deducts spending on long-lived assets from operating cash flow.
Our comparison of the two forecasts shows that the $70 million increase at the midpoint comes from two sources: $50 million more operating cash flow and $20 million less capital spending.
| 2026 forecast, USD millions | August 3 | November 2 |
|---|---|---|
| Operating cash flow | 1,025 to 1,125 | 1,110 to 1,140 |
| Capital spending | 260 to 280 | 240 to 260 |
| Adjusted free cash flow | 745 to 865 | 850 to 900 |
Debt repayment shares the cash with shareholders
Allison repaid $100 million of debt during the quarter. It also spent $57 million repurchasing shares and paid $23 million in dividends.
The Dana acquisition had a final purchase price of $2.628 billion and was financed with existing cash and new borrowing. Debt stood at $4.012 billion on September 30, compared with $2.890 billion at the end of 2025. Interest expense for the quarter rose to $51 million from $24 million.
Quarterly net income rose to $191 million from $137 million, although profit for the first nine months remained below last year's level.
The Allison company profile tracks the completed deal, the revised annual forecasts and the cash available to reduce debt.