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TransDigm Group (TDG) to Report Q4 Earnings: What's in Store?

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Transdigm Group Incorporated (TDG - Free Report) is set to report fourth-quarter fiscal 2020 results on Nov 12, before market open.

In the last reported quarter, the company delivered an earnings surprise of 55.56%. Moreover, it surpassed the Zacks Consensus Estimate in the trailing four quarters, delivering an earnings surprise of 26.87%, on average.

Let’s see how things have shaped up prior to this announcement.

Factors Under Consideration

TransDigm Group has been witnessing weak Original Equipment Manufacturer (OEM) sales over the past couple of quarters due to the impacts of the COVID-19 pandemic. Its commercial aftermarket business has also been suffering from decreased air travel, courtesy of COVID-19. Consequently, lower aftermarket bookings have also been declining, primarily due to the OEM production rate cuts as a result of COVID-19 impacts on commercial aircraft demand.

Expecting these trends to have continued in the fiscal fourth quarter as well, the company's management projected lower demand for its commercial OEM products due to reductions in OEM production rates and airlines deferring or canceling new aircraft orders.

This is likely to have negatively impacted the company's overall revenues during the fiscal fourth quarter, as approximately 65% of its revenues are generated from the commercial market. Notably, the Zacks Consensus Estimate for fiscal fourth-quarter revenues is pegged at $1.10 billion, indicating a deterioration of 28.9% from fourth-quarter fiscal 2019.

Such dismal sales projections make us skeptical about the company’s fiscal fourth-quarter earnings. Although the company has adopted cost-saving initiatives, the reduced demand and uncertainties concerning the pandemic might have pushed up its quarterly expenses, thereby hurting the bottom-line performance.

The Zacks Consensus Estimate for earnings stands at $1.90 per share, implying a plunge of 66.2% from the year-ago quarter’s reported figure.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for TransDigm Group this time around. The combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But this is not the case here.

Earnings ESP: The company’s Earnings ESP is -2.18%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: TransDigm Group carries a Zacks Rank #3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Transdigm Group Incorporated Price and EPS Surprise

Recent Defense Releases

Lockheed Martin (LMT - Free Report) reported third-quarter 2020 earnings from continuing operations of $6.25 per share, which surpassed the Zacks Consensus Estimate of $6.07 by 3%.

The Boeing Company (BA - Free Report) incurred an adjusted loss of $1.39 per share for third-quarter 2020, narrower than the Zacks Consensus Estimate of a loss of $2.33.

General Dynamics (GD - Free Report) reported third-quarter 2020 earnings from continuing operations of $2.90 per share, which beat the Zacks Consensus Estimate of $2.85 by 1.8%.

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