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TransDigm (TDG) Q3 Earnings Beat Estimates, Sales Fall Y/Y

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TransDigm Group Incorporated (TDG - Free Report) reported third-quarter fiscal 2020 adjusted earnings of $1.54 per share, which surpassed the Zacks Consensus Estimate of 99 cents by 55.6%. However, the bottom line decreased 66.9% from $4.65 reported in the year-ago quarter.
 
Barring one-time items, the company reported GAAP loss of 9 cents per share against earnings of $2.27 in the year-ago quarter.

The year-over-year deterioration can be attributed to a decline in net sales, along with COVID-19 restructuring costs, higher interest expense and a higher tax rate due to discrete one-time tax charges being taken during the quarter.

Sales

Net sales amounted to $1,022 million, reflecting a decline of 32.8% from $1,521 million in the prior-year quarter. The reported figure however outpaced the Zacks Consensus Estimate of $1,007 million by 1.5%. Meanwhile, organic sales declined 9.6%.

Operating Results

The company incurred net loss of $5 million from continuing operations in the quarter against income of $128 million in the comparable quarter a year ago.

The effective tax rate was 113.5% compared with 30% in the comparable period in fiscal 2019. The deterioration was due to the unfavorable economic impact of the COVID-19 pandemic on the company's net interest deduction limitation and a discrete cumulative adjustment associated with excess tax benefits from share-based payments.

Financial Position

TransDigm ended the third quarter of fiscal 2020 with cash and cash equivalents of $4,549 million, up from $1,467 million as of Sep 30, 2019. At the end of the reported quarter, the company’s long-term debt was $19.41 billion, up from $16.47 billion as of Sep 30, 2019.

Cash from operating activities amounted to $991 million as of Jun 27, 2020 compared with $768 million as of Jun 29, 2019.

Fiscal 2020 Outlook

Given the considerable uncertainty around the extent and duration of business disruptions related to the COVID-19 pandemic and how it will impact operations, TransDigm kept its previously provided fiscal 2020 guidance suspended.

Zacks Rank

TransDigm Group currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

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