CNH Industrial (NYSE: CNHI) and Allison Transmission (NYSE:ALSN) are both mid-cap industrials companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, earnings, dividends, analyst recommendations and valuation.

Institutional and Insider Ownership

18.2% of CNH Industrial shares are held by institutional investors. 7.9% of Allison Transmission shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
CNH Industrial 1.66% 14.63% 1.41%
Allison Transmission 16.34% 45.65% 8.34%

Analyst Ratings

This is a summary of current recommendations and price targets for CNH Industrial and Allison Transmission, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CNH Industrial 0 2 6 0 2.75
Allison Transmission 2 6 5 0 2.23

CNH Industrial currently has a consensus target price of $13.43, suggesting a potential downside of 0.86%. Allison Transmission has a consensus target price of $43.70, suggesting a potential upside of 1.27%. Given Allison Transmission’s higher possible upside, analysts clearly believe Allison Transmission is more favorable than CNH Industrial.

Volatility and Risk

CNH Industrial has a beta of 0.71, meaning that its share price is 29% less volatile than the S&P 500. Comparatively, Allison Transmission has a beta of 1.22, meaning that its share price is 22% more volatile than the S&P 500.

Valuation and Earnings

This table compares CNH Industrial and Allison Transmission’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
CNH Industrial $24.87 billion 0.74 -$252.00 million $0.32 42.34
Allison Transmission $1.84 billion 3.32 $214.90 million $2.27 19.01

Allison Transmission has lower revenue, but higher earnings than CNH Industrial. Allison Transmission is trading at a lower price-to-earnings ratio than CNH Industrial, indicating that it is currently the more affordable of the two stocks.

Dividends

CNH Industrial pays an annual dividend of $0.12 per share and has a dividend yield of 0.9%. Allison Transmission pays an annual dividend of $0.60 per share and has a dividend yield of 1.4%. CNH Industrial pays out 37.5% of its earnings in the form of a dividend. Allison Transmission pays out 26.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. CNH Industrial has increased its dividend for 4 consecutive years. Allison Transmission is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Allison Transmission beats CNH Industrial on 11 of the 17 factors compared between the two stocks.

About CNH Industrial

CNH Industrial N.V. is a capital goods company. The Company is engaged in the design, production, marketing, sale and financing of agricultural and construction equipment, trucks, commercial vehicles, buses and specialty vehicles for firefighting, defense and other uses, as well as engines, transmissions and axles for vehicles and engines under marine and power generation applications. Its segments include Agricultural Equipment, which designs, manufactures and distributes farm machinery and implements; Construction Equipment, which designs, manufactures and distributes construction equipment; Commercial Vehicles, which designs, produces and sells a range of light, medium and heavy vehicles for the transportation and distribution of goods; Powertrain, which designs, manufactures and offers a range of propulsion and transmission systems, and axles for on- and off-road applications, and Financial Services, which offers a range of financial services to dealers and customers.

About Allison Transmission

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.

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