ITT (NYSE:ITT) & Allison Transmission (NYSE:ALSN) Critical Analysis

ITT (NYSE:ITT) and Allison Transmission (NYSE:ALSN) are both large-cap industrials companies, but which is the superior stock? We will contrast the two companies based on the strength of their dividends, profitability, valuation, institutional ownership, risk, earnings and analyst recommendations.

Dividends

ITT pays an annual dividend of $1.54 per share and has a dividend yield of 0.7%. Allison Transmission pays an annual dividend of $1.16 per share and has a dividend yield of 0.9%. ITT pays out 31.7% of its earnings in the form of a dividend. Allison Transmission pays out 16.7% 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. ITT has raised its dividend for 10 consecutive years and Allison Transmission has raised its dividend for 2 consecutive years. Allison Transmission is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk & Volatility

ITT has a beta of 1.25, suggesting that its share price is 25% more volatile than the S&P 500. Comparatively, Allison Transmission has a beta of 1.06, suggesting that its share price is 6% more volatile than the S&P 500.

Valuation and Earnings

This table compares ITT and Allison Transmission”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ITT	$3.94 billion	4.79	$488.00 million	$4.86	43.52
Allison Transmission	$3.01 billion	3.42	$623.00 million	$6.96	18.03

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
ITT	8.07%	15.47%	7.25%
Allison Transmission	11.12%	42.33%	10.26%

Analyst Recommendations

This is a breakdown of current recommendations for ITT and Allison Transmission, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ITT	0	1	8	0	2.89
Allison Transmission	0	3	4	2	2.89

ITT currently has a consensus target price of $258.78, suggesting a potential upside of 22.34%. Allison Transmission has a consensus target price of $135.62, suggesting a potential upside of 8.08%. Given ITT’s higher probable upside, research analysts clearly believe ITT is more favorable than Allison Transmission.

Institutional and Insider Ownership

91.6% of ITT shares are held by institutional investors. Comparatively, 96.9% of Allison Transmission shares are held by institutional investors. 0.9% of ITT shares are held by insiders. Comparatively, 1.1% of Allison Transmission shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

Allison Transmission beats ITT on 10 of the 17 factors compared between the two stocks.

About ITT

ITT Inc. is a global manufacturer of engineered components and technology serving industrial, transportation, aerospace and defense, and energy markets. Its products include pumps and valves, brake pads and shock absorbers, and specialized connectors and control components. The company operates through three main businesses: Motion Technologies, Industrial Process, and Connect & Control Technologies. These businesses provide products and services used in applications ranging from automotive braking systems and industrial fluid handling to aerospace equipment and energy infrastructure.

About Allison Transmission

Allison Transmission designs and manufactures vehicle propulsion solutions, with a core business in fully automatic transmissions for commercial and military vehicles. Its products are used in applications such as buses, trucks, construction and refuse vehicles, emergency vehicles, and defense equipment. The company also develops electrified propulsion technologies, including hybrid systems and electric axles, for commercial vehicles. Allison serves customers in markets around the world. Founded in 1915, Allison’s transmission business was part of General Motors for decades before becoming independent in 2007.