This week’s Stock of the Week is helping to transform its industry—something that could kick its profits into high gear.

Better Driving

Allison Transmission Holdings Inc. (ALSN) makes fully automatic transmissions for medium-duty and heavy-duty commercial and US defense vehicles. There is a large-scale conversion going on in these sectors now, from manual transmissions to automatics—a huge opportunity for Allison.

Truck and bus companies, operators of construction equipment, RV manufacturers and makers of 18-wheelers have realized that automatic transmissions make the vehicles easier to drive, the drivers easier to train, the driving itself safer, and fuel use lower than with older heavy-duty manual transmissions. American trucks are already 80% converted to automatics, and Allison has a lot of long-term contracts with trucking companies to service the transmissions—which have lower maintenance needs than the old manual ones but still require regular attention. Outside the US, only 5% of commercial vehicles have automatic transmissions, so Allison is moving aggressively into overseas expansion.

A major economic downturn could be an issue for the company, but even then, its long-term service contracts would provide support. The dividend of $0.60/share/yr. recently yielded 1.7% and appears secure. Revenue of $1.84 billion last year should grow to $2.15 billion this year and $2.22 billion in 2018.

Fiscal year: December. Earnings per share: 2018 est./$2.25…2017 est./$2.11…2016/$1.27.

Jack Newell is chairman and CEO, Dover Partners, Inc., Dayton, Ohio, which manages $100 million. Dover-Partners.com