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Why Is TransDigm (TDG) Down 2.5% 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 lost about 2.5% in that time frame, outperforming the S&P 500.

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

TransDigm's Q1 Earnings Miss Estimates, Sales Rise Y/Y

TransDigm Group reported first-quarter fiscal 2022 adjusted earnings of $3 per share, which missed the Zacks Consensus Estimate of $3.10. The bottom line however improved a solid 52.3% from $1.97 reported a year ago.

Barring one-time items, the company reported GAAP earnings of $1.96 per share against a loss of 42 cents incurred in the year-ago quarter.

This year-over-year improvement can be attributed to an increase in net sales, favorable sales mix, along with lower COVID-19 restructuring costs and stock compensation expense.

Sales

Net sales amounted to $1,194 million in the fiscal first quarter, increasing 8% from $1,108 million in the prior-year quarter. The reported figure however missed the Zacks Consensus Estimate of $1,224 million by 2.5%.

Operating Results

Gross profit for the quarter rose 22.2% to $661 million from $541 million in the comparable quarter a year ago.

Consequently, income from operations increased 44.4% year over year to $455 million.

Financial Position

TransDigm ended first-quarter fiscal 2022 with cash and cash equivalents of $4,813 million, up from $4,787 million as of Sep 30, 2021.

At the end of the fiscal first quarter, the company’s long-term debt was $19.39 billion, slightly up from $19.37 billion as of Sep 30, 2021.

Cash from operating activities amounted to $279 million as of Jan 1, 2022, compared with $274 million as of Jan 2, 2021.

Guidance

Given the continued disruptions in TransDigm’s primary commercial end markets, thanks to the impact of the COVID-19 pandemic, the company once again refrained from providing fiscal 2022 guidance.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, TransDigm has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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 looks promising. 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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