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What Transdigm Group (TDG) Estimates Say About Its Recent Performance

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Transdigm Group (TDG - Free Report) reported March quarter earnings that grew 49.6% to beat the Zacks Consensus Estimate by 4.0%. What’s more, revenue for the period grew 11.1% to also surprise positively, although by a mere 1.4%. A closer look at the segmental performance may shed some light on where the outperformance lay.

Segmental revenue beats/misses may not exactly reflect the result on the total revenue line because not every analyst providing total estimates also provides the line details. But they are still indicative of segmental performance in any given quarter:

Accordingly, Transdigm’s Power & Control segment revenue of $708.0 million missed estimates by 0.5%, its Airframe segment’s reported revenue of $579 million beat by 9.4% while Non-Aviation segment revenue of $40 million was also 1.0% short of the estimate.  

Within Power & Control, Commercial Aftermarket did best, beating analyst estimates by 4.6%. Defense missed by 3.1% and commercial OEM by less than a percent.

Within Airframe, Commercial OEM posted a 7.3% positive surprise, commercial aftermarket a positive 13.2% surprise and defense a negative 7.5% surprise.

Analyst estimates are generally a good indication of the results a company is likely to report in any given quarter. That is because analysts study various aspects of the business including the major drivers of its growth, the internal strengths and weaknesses, the cost base on which it operates, pricing strength and so forth to arrive at projections of its future performance. Hence, these projections are studied opinions that can be depended upon.

And because they can be depended upon, investors develop a certain expectation about a company’s performance based on the estimates for the concerned period. And when a company significantly underperforms or outperforms estimates, there is usually a reaction from investors that is represented in the share prices. In this case, investors appeared pleased with the results, sending shares up 4.6%.

One-Month Price Performance

 

Drilling further down into the numbers tells us more about each segment’s quarterly performance.

Power & Control, Airframe and Non-Aviation segments posted positive EBITDA surprises of 1.9%, 14.1% and 3.5%, respectively.

Conclusion

From the above, it appears that the commercial side of the business is recovering as leisure and increasingly, business travelers return. Transdigm is also doing well on the cost control front in the face of supply chain disruptions and labor market tightness that continue to pressure revenue.

Zacks Rank

Transdigm has a Zacks #3 (Hold) Rank, so investors looking for exposure to the industry would probably do better with #2 (Buy) ranked AerSale (ASLE - Free Report) , AeroVironment (AVAV - Free Report) , or Kratos Defense & Security Solutions (KTOS - Free Report) instead.