Back to top

Analyst Blog

TransDigm Group Incorporated (TDG - Analyst Report) hit an all-time high of $155.97 on May 15, 2013. Total shares traded on that date were 556,683, more than double the average volume of shares traded over the last three months aggregating 273,703. The closing price of TransDigm on May 15 was $154.69, representing a year- to-date return of 10.1%.

Shares of this leading global designer, producer and supplier of highly engineered aircraft components, had hit a new 52-week high twice in the last four months. TransDigm has delivered an average positive earnings surprise of 22.30% over the trailing four quarters and has a market cap of $7.51 billion with a long-term expected earnings growth rate of 16.55%.

Growth Drivers

On the same day, TransDigm announced that it has agreed to acquire New York-based, Arkwin Industries Inc. for an all cash deal worth $286 million. TransDigm believes that Arkwin, which manufactures highly engineered aerospace hydraulic and fuel system components for commercial and military aircraft, helicopters and other specialty applications, will help it widen its portfolio on a number of platforms and engine applications. Arkwin is a key supplier to Boeing, Airbus, Bombardier and Embraer regional jets. Management believes that this acquisition will create significant value addition to the firm and this has likely boosted the investor confidence.

Also, TransDigm recently acquired Aerosonic Corporation which designs and manufactures highly engineered aviation components for use in commercial military for $7.75 per share in cash.

TransDigm reported its second quarter results on May 7, wherein, it managed to beat the Zacks Earnings Consensus by a penny and reported a 10% year-over-year growth in sales. Concurrent with the earnings release, management also revised its net sales and adjusted earnings per share guidance for fiscal 2013 upward, and now expects fiscal sales to be in the range of $1,840 million to $1,880 million with adjusted EPS to be $6.83 to $7.05.

With a strong free cash flow and meticulous capital structure, TransDigm seems to be utilizing its resources for inorganic growth, which are helping it boost its core operations. The company’s financial performance continues to reflect the ability of its proven operating strategy to consistently create real intrinsic value for shareholders. TransDigm believes that these acquisitions will provide incremental revenue and earnings for the company going forward. It seems that investors are also impressed with TransDigm’s strategic acquisitions and its growth in aftermarket revenues, which yields higher gross margin and provides stability during downturns.

TransDigm currently carries Zacks Rank #3 (Hold). Some other stocks in the industry worth mentioning are Elbit Systems and Kratos Defense & Security Solutions, Inc. (KTOS - Snapshot Report), each carrying a Zacks Rank#1(Strong Buy).

 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%