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TransDigm (TDG) Up 14.8% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for TransDigm Group (TDG - Free Report) . Shares have added about 14.8% 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's Q2 Earnings Beat Estimates, Sales Down Y/Y

TransDigm Group reported second-quarter fiscal 2021 adjusted earnings of $2.58 per share, which surpassed the Zacks Consensus Estimate of $2.52 by 2.4%. However, the bottom line declined 49.4% from $5.10 reported a year ago.

Barring one-time items, the company reported GAAP earnings of $1.79 per share compared with $5.56 in the year-ago quarter.

Sales

Net sales amounted to $1,194 million, declining 17.3% from $1,443 million in the prior-year quarter. The reported figure, however, outpaced the Zacks Consensus Estimate of $1,180 million by 1.2%.

Operating Results

Net income from continuing operations for the quarter plunged 67.5% to $105 million compared with $323 million in the comparable quarter a year ago. The decrease in income from continuing operations primarily reflects the decline in net sales.

Financial Position

TransDigm ended the second quarter of fiscal 2021 with cash and cash equivalents of $4,072 million, down from $4,717 million as of Sep 30, 2020.

At the end of the reported quarter, the company’s long-term debt summed $19.40 billion, up from $19.38 billion as of Sep 30, 2020.

Cash from operating activities amounted to $372 million as of Apr 3, 2021, compared with $594 million as of Mar 28, 2020.

Fiscal 2021 Outlook

Given the considerable uncertainty concerning the extent and duration of business disruptions stemming from the COVID-19 pandemic and how it will impact operations further, TransDigm kept its previously provided fiscal 2021 guidance suspended.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -10.58% due to these changes.

VGM Scores

At this time, TransDigm has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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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