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TransDigm (TDG) Q3 Earnings Miss, Up Y/Y on Sales Growth

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TransDigm Group Incorporated (TDG - Free Report) reported third-quarter fiscal 2018 adjusted earnings of $4.01 per share, which missed the Zacks Consensus Estimate of $4.06 by 1.2%. However, the bottom line improved 19% from $3.37 a year ago.

Barring one-time items, the company reported GAAP earnings of $3.91 per share compared with $3.09 in the year-ago quarter. The year-over-year upside was driven by decent top-line growth, lower effective tax rate and improvements in operating margin.


Net sales amounted to $980.7 million, reflecting year-over-year growth of 9.2%. However, the reported figure missed the Zacks Consensus Estimate of $1,001 million by 2%. Organic sales grew 4.4%.

Decent sales growth in commercial OEM, commercial aftermarket and defense contributed to the company’s top-line performance in the quarter under review.

Transdigm Group Incorporated Price, Consensus and EPS Surprise


Transdigm Group Incorporated Price, Consensus and EPS Surprise | Transdigm Group Incorporated Quote


TransDigm frequently acquires proprietary aerospace businesses with significant aftermarket content, which strengthen the company’s foothold in its core market and are in line with its operating strategies. Evidently, on Jul 13, 2018, TransDigm completed the acquisition of Skandia Inc. from Graycliff Partners for approximately $84 million. Notably, Skandia is a leading provider of highly engineered foam, foam fabrication, flammability testing and acoustic solutions for the business jet market.

We expect TransDigm’s acquisition spree to boost its product range with the proprietary products, which enjoy strong position on high use of platforms, robust aftermarket content and an excellent reputation.

Financial Position

TransDigm ended the fiscal third quarter with cash and cash equivalents of $1,853 million, up from $650.6 million as of Sep 30, 2017. At the end of the reported quarter, the company’s long-term debt summed $12.5 billion compared with $11.39 billion at the end of September 2017.

Cash from operating activities amounted to $690.9 million at the end of Jun 30, 2018, compared with $555.2 million at the end of Jun 30, 2017.

Fiscal 2018 Guidance

Concurrent with the fiscal third-quarter results, Transdigm raised the lower end of its sales guidance for fiscal 2018, to incorporate its impressive operating performance. The company now expects its net sales to be in the range of $3,780-$3,820 million (compared with $3,740-$3,820 million guided earlier).

Adjusted earnings per share are now envisioned to be in the band of $17.45-$17.77, narrower than $17.35-$17.99 projected previously.

Net income from continuing operations is estimated to be in the band of $928-$946 million compared with the earlier projection of $902-$938 million.

Zacks Rank

Transdigm currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Aerojet Rocketdyne Holdings, Inc. (AJRD - Free Report) reported second-quarter 2018 earnings of 45 cents per share, which surpassed the Zacks Consensus Estimate of 26 cents by 73.1%.

Lockheed Martin’s (LMT - Free Report) second-quarter 2018 adjusted earnings came in at $4.31 per share, outpacing the Zacks Consensus Estimate of $3.89 by 10.8%.

Textron (TXT - Free Report) reported second-quarter 2018 earnings from continuing operations of 87 cents per share, which exceeded the Zacks Consensus Estimate of 70 cents by 24.3%.

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