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Why Is TransDigm (TDG) Up 8.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for TransDigm Group (TDG - Free Report) . Shares have added about 8.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is TransDigm due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

TransDigm Q4 Earnings Beat Estimates, Sales Fall Y/Y

TransDigm Group Incorporated (TDG - Free Report) reported fourth-quarter fiscal 2020 adjusted earnings of $2.89 per share, which surpassed the Zacks Consensus Estimate of $1.90 by 52.1%. However, the bottom line plunged 48.6% from $5.62 reported in the year-ago quarter.

Barring one-time items, the company reported GAAP earnings of $1.76 per share compared with $4.08 in the year-ago quarter.

Sales

Net sales amounted to $1,173 million, reflecting a decline of 23.9% from $1,541 million in the prior-year quarter. The reported figure, however, outpaced the Zacks Consensus Estimate of $1,096 million by 7%. Meanwhile, organic sales dropped 13.8%.

Operating Results

The company reported a net income of $101 million from continuing operations in the quarter compared with the net income of $317 million in the comparable quarter a year ago.

The effective tax rate for fiscal 2020 was 11.7% compared to 20.9% for fiscal 2019.

Financial Position

TransDigm ended the fourth quarter of fiscal 2020 with cash and cash equivalents of $4,717 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 $19.38 billion, up from $16.47 billion as of Sep 30, 2019.

Cash from operating activities amounted to $1,213 million as of Sep 30, 2020, compared with $1,015 million as of Sep 30, 2019.

Fiscal 2020 Outlook

Given the considerable uncertainty concerning 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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -13.96% due to these changes.

VGM Scores

At this time, TransDigm has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, TransDigm has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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