We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
TransDigm (TDG) Q1 Earnings: A Disappointment in Store?
Read MoreHide Full Article
TransDigm Group Incorporated (TDG - Free Report) is slated to report first-quarter fiscal 2017 results, before the opening bell on Feb 7.
TransDigm has a modest earnings surprise history, having beaten estimates thrice over the trailing four quarters, for an average positive surprise of 3.6%. Last quarter, the company posted a positive earnings surprise of 1%.
Let's see how things are shaping up for this announcement.
Factors to Consider
TransDigm designs, produces and supplies highly engineered proprietary aerospace components and certain systems/subsystems. In fact, about 90% of its sales are generated by proprietary products, that is, products for which the company owns the intellectual property. This translates into consistent and sustained revenue generation capacity through all phases of the aerospace cycle. We believe that the company’s fiscal first-quarter results will benefit from its robust proprietary sales.
Also, we perceive that stable aftermarkets, which have historically produced higher gross margins, will be one of the key profit drivers this earnings season. TransDigm is also enjoying strong momentum in commercial aftermarket sales, which should reflect in the upcoming results as well.
The company’s commercial transport industry has also been gaining traction over the past few months, which is likely to boost the upcoming quarterly results.
This apart, the company has been consistently strengthening its highly-engineered proprietary aerospace business with strategic acquisitions. During fourth-quarter fiscal 2016, TransDigm had posted an 8.1% year-over-year increase in the top line, as its accretive acquisitions contributed $88.6 million to sales and boosted organic revenue growth. TransDigm’s acquired businesses will likely continue being solid growth drivers in the coming times.
Despite these positives, TransDigm is seeing some negative trends at present, like weaker defense aftermarket orders and soft business jet, helicopter and freighter revenues, which might strain its top-line growth in the fiscal first-quarter results.
In fact, over the past one year, TransDigm’s shares have recorded an average negative return of 0.8%, in stark contrast to the Zacks categorized Aerospace/Defense Equipment industry’s positive average return of 17.5%.
In addition, softness in global macroeconomic conditions is impacting air travel, adding to the company’s woes. In addition, reduction in number of flight hours of customers can thwart the company’s growth momentum. The company has some concerns about the commercial transport industry in the coming times as well. This could hamper the company’s numbers in the upcoming results.
Transdigm Group Incorporated Price, Consensus and EPS Surprise
Our proven model does not conclusively show that TransDigm will beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: The Earnings ESP for TransDigm is currently pegged at -0.44%. This is because the Most Accurate estimate of $2.26 is below the Zacks Consensus Estimate of $2.27.
Zacks Rank: TransDigm currently has a Zacks Rank #4 (Sell). Note that we caution against stocks with Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
LPL Financial Holdings Inc. (LPLA - Free Report) is likely to report results around Feb 9. The company has an Earnings ESP of +2.78% and carries a Zacks Rank #2.
Newfield Exploration Company has an Earnings ESP of +5.41% and a Zacks Rank #3. The company is expected to release earnings results on Feb 22.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research.See these stocks free >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
TransDigm (TDG) Q1 Earnings: A Disappointment in Store?
TransDigm Group Incorporated (TDG - Free Report) is slated to report first-quarter fiscal 2017 results, before the opening bell on Feb 7.
TransDigm has a modest earnings surprise history, having beaten estimates thrice over the trailing four quarters, for an average positive surprise of 3.6%. Last quarter, the company posted a positive earnings surprise of 1%.
Let's see how things are shaping up for this announcement.
Factors to Consider
TransDigm designs, produces and supplies highly engineered proprietary aerospace components and certain systems/subsystems. In fact, about 90% of its sales are generated by proprietary products, that is, products for which the company owns the intellectual property. This translates into consistent and sustained revenue generation capacity through all phases of the aerospace cycle. We believe that the company’s fiscal first-quarter results will benefit from its robust proprietary sales.
Also, we perceive that stable aftermarkets, which have historically produced higher gross margins, will be one of the key profit drivers this earnings season. TransDigm is also enjoying strong momentum in commercial aftermarket sales, which should reflect in the upcoming results as well.
The company’s commercial transport industry has also been gaining traction over the past few months, which is likely to boost the upcoming quarterly results.
This apart, the company has been consistently strengthening its highly-engineered proprietary aerospace business with strategic acquisitions. During fourth-quarter fiscal 2016, TransDigm had posted an 8.1% year-over-year increase in the top line, as its accretive acquisitions contributed $88.6 million to sales and boosted organic revenue growth. TransDigm’s acquired businesses will likely continue being solid growth drivers in the coming times.
Despite these positives, TransDigm is seeing some negative trends at present, like weaker defense aftermarket orders and soft business jet, helicopter and freighter revenues, which might strain its top-line growth in the fiscal first-quarter results.
In fact, over the past one year, TransDigm’s shares have recorded an average negative return of 0.8%, in stark contrast to the Zacks categorized Aerospace/Defense Equipment industry’s positive average return of 17.5%.
In addition, softness in global macroeconomic conditions is impacting air travel, adding to the company’s woes. In addition, reduction in number of flight hours of customers can thwart the company’s growth momentum. The company has some concerns about the commercial transport industry in the coming times as well. This could hamper the company’s numbers in the upcoming results.
Transdigm Group Incorporated Price, Consensus and EPS Surprise
Transdigm Group Incorporated Price, Consensus and EPS Surprise | Transdigm Group Incorporated Quote
Earnings Whispers
Our proven model does not conclusively show that TransDigm will beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: The Earnings ESP for TransDigm is currently pegged at -0.44%. This is because the Most Accurate estimate of $2.26 is below the Zacks Consensus Estimate of $2.27.
Zacks Rank: TransDigm currently has a Zacks Rank #4 (Sell). Note that we caution against stocks with Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
CNA Financial Corporation (CNA - Free Report) is expected to report results around Feb 6. The company has an Earnings ESP of +13.42% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
LPL Financial Holdings Inc. (LPLA - Free Report) is likely to report results around Feb 9. The company has an Earnings ESP of +2.78% and carries a Zacks Rank #2.
Newfield Exploration Company has an Earnings ESP of +5.41% and a Zacks Rank #3. The company is expected to release earnings results on Feb 22.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>