GR Goodrich Corp. (The)

TransDigm Group Incorporated (TDG) has completed its acquisition worth approximately $84 million of Harco Laboratories Incorporated. The initial announcement of the acquisition was made on November 8, 2011.

Harco, based in Branford, Connecticut, specializes in designing and manufacturing proprietary, highly engineered thermocouples, sensors, engine cable assemblies and related products for major commercial aircraft.  Engines manufactured by Pratt & Whitney, Rolls-Royce, International Aero Engines, Honeywell and others employ the products from Harco.

Harco's proprietary products and significant aftermarket presence will significantly benefit TransDigm. Besides, revenue generated by Harco in fiscal 2011 amounted to approximately $37 million.

TransDigm competes on the basis of engineering, manufacturing and marketing of high quality products that meet or exceed the performance and maintenance requirements of customers through consistent and timely delivery along with superior customer service and support. The industry’s stringent regulatory certification and technical requirements with huge investment necessary for the development and certification of products, create barriers to entry for potential new competitors. As long as customers receive products that meet or exceed expectations and maintain performance standards, they will have a reduced incentive to certify another supplier due to the cost and time of the technical design and testing certification processes. In addition, concerns regarding safety and flight delays, if products are unavailable or not dependable, are reasons for its customers to continue their long-term supplier relationships.

TransDigm Group’s business is sensitive to the number of flight hours that its customers’ planes spend aloft, the size and age of the worldwide aircraft fleet and customers’ profitability. These items are, in turn, affected by general economic conditions. Further, the military and defense market is significantly dependent upon government budget trends, particularly the DOD budget. In addition to normal business risks, its supply of products to the United States Government is subject to unique risks largely beyond its control. Major competitors of the company are Goodrich Corp. (GR), Honeywell International Inc. (HON) and United Technologies Corp. (UTX).

Based in Cleveland, Ohio, TransDigm Group Inc.designs, produces, and supplies engineered aircraft components for use on commercial and military aircraft. The company operates principally in the US.

We currently maintain a Neutral rating on TransDigm with a Zacks #3 Rank (short-term Hold recommendation).

 
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