TransDigm Delivers Mixed Q4 Results; Shares Fall

Aerospace manufacturing company TransDigm Group Inc. (TDG) delivered mixed fourth-quarter results with earnings beating estimates, and sales missing estimates. Following the news, shares fell 1% and closed at $647.09 on November 16.

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Both domestic and international travel demand is on the rise due to a slow-down in the COVID-19 pandemic, and higher vaccination rates. The company is witnessing momentum in demand for its products and sees encouraging growth in the upcoming year.

Mixed Results

The company’s net sales rose 9% year-over-year to $1.28 billion, yet failed to meet analysts’ estimates of $1.32 billion.

On a positive note, the company posted adjusted earnings of $4.25 per share, up 47% year-over-year, and significantly higher than analyst estimates of $3.70 per share.

However, net sales declined 6% on an annual basis to $4.80 billion, while adjusted earnings fell 16% to $12.13 per share.

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Management Comments

Kevin Stein, President, and CEO of TransDigm, said, “Encouraging commercial air travel trends cause us to be optimistic for the continued recovery of the commercial aerospace industry in the upcoming year. Although uncertainty remains about the shape and pace of recovery, we believe that in time the commercial aerospace industry and our business will fully recover and expand into the future. We look forward to fiscal 2022 and the opportunity to create value for our stakeholders.”

Analysts’ View

Responding to TransDigm’s quarterly performance, Cowen & Co. analyst Gautam Khanna, said, “September Quarter EPS was above Street on better margins from favorable aftermarket (A/M) vs. Original Equipment Manufacturer (OEM) sales mix. Investors should be positive about the improving demand for 2nd derivatives. However, quantification of P&L items should lower Street’s F22 sales, adj. EBITDA, and adj. EPS.”

Khanna reiterated his Buy rating on the stock with a price target of $700 (8.2% upside potential).

With 6 unanimous Buys, the stock commands a Strong Buy consensus rating. The average TransDigm price target of $750.67 implies 16% upside potential to current levels. Shares have gained 12% over the past year.