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What's in Store for TransDigm Group's (TDG) Q2 Earnings?

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Transdigm Group Incorporated (TDG - Free Report) is set to report second-quarter fiscal 2020 results on May 5, before market open.

In the last reported quarter, the company delivered a positive earnings surprise of 8.11%. Moreover, earnings surpassed the Zacks Consensus Estimate in the trailing four quarters by 10.67%, on average.

Let’s see how things have shaped up prior to this announcement.

Factors at Play

We expect commercial after-market sales to have boosted Transdigm Group’s top-line performance in the first quarter, keeping up with its usual trend. Further, positive synergies from the Esterline buyout are expected to have contributed significantly to the top line in the to-be-reported quarter.

In line with this, the Zacks Consensus Estimate for fiscal second-quarter revenues is pegged at $1.43 billion, indicating an annual improvement of 19.5%.

However, commercial OEM market sales are expected to reflect signs of weakness primarily due to Boeing’s (BA - Free Report) 737 MAX production rate cuts. Further, due to the ongoing crisis caused by the coronavirus pandemic, the company might have been unable to make significant deliveries during the latter part of the quarter. This is likely to have negatively impacted the to-be-reported quarter’s bottom line.

In line with this, the Zacks Consensus Estimate for fiscal second-quarter earnings stands at $4.18 per share, implying a marginal 0.7% fall from the year-ago quarter’s reported figure.

Transdigm Group Incorporated Price and EPS Surprise

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for TransDigm Group this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But this is not the case here.

Earnings ESP: The company’s Earnings ESP is -4.79%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: TransDigm Group carries a Zacks Rank #5 (Strong Sell), currently.

Stocks to Consider

Here are some defense companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Spirit Aerosystems Holdings, Inc. (SPR - Free Report) is scheduled to report first-quarter 2020 results on May 6. The company has an Earnings ESP of +18.35% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls Industries (HII - Free Report) is scheduled to report first-quarter 2020 results on May 7. The company has an Earnings ESP of +1.79% and a Zacks Rank #3.

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