TransDigm Kept at Neutral - Analyst Blog
November 30 2011 - 12:59PM
Zacks
We recently maintained a Neutral recommendation on
TransDigm Group Inc. (TDG).
Based in Cleveland, Ohio, TransDigm Group Inc. is a leading
global designer, producer and supplier of highly engineered
aircraft components for use on nearly all commercial and military
aircraft in service today. The company’s business is well
diversified due to the broad range of products it offers to its
customers.
TransDigm Group has large, renowned customers in the
aerospace/defense sector. These include: (1) distributors of
aerospace components; (2) worldwide commercial airlines,
including national and regional airlines; (3) large commercial
transport and regional and business aircraft OEMs; (4) various
armed forces of the United States and friendly foreign governments;
(5) defense OEMs; (6) system suppliers; and
(7) various other industrial customers.
Recently, the company came out with its fourth-quarter 2011
earnings per share from continuing operations of $1.20, outpacing
the Zacks Consensus Estimate by $0.04 and prior-year earnings of
$0.96. For fiscal 2011, earnings per share from continuing
operations came in at $2.80, below the Zacks Consensus Estimate of
$3.02, above prior-year earnings of 2.52 cents.
Net sales were $343.0 million, a rise of 53.7% year over year.
Organically, sales during the quarter increased by approximately
13.7%, driven by improved commercial aftermarket and OEM markets
and increase in defense sales. Sales during the quarter were also
aided by acquisitions of Semco Instruments, McKechnie Aerospace and
Talley Actuation.
For fiscal 2011, net sales were $1.21 billion, up 45.7% year
over year. Besides, about 50% of sales growth was derived from
recent acquisitions and strong organic revenue growth in both the
commercial OEM and aftermarket aerospace markets.
By fiscal 2012, the company expects to achieve revenue growth in
Commercial OEM market in the mid-teen percentage range, about 10%
in commercial after market and decline slightly in the Defense
market. Fiscal 2012 will witness considerable uncertainty regarding
the overall economy and also regarding the United States Defense
Budget.
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).
We expect the company to perform in line with the market and
hence maintained a Neutral recommendation.
GOODRICH CORP (GR): Free Stock Analysis Report
HONEYWELL INTL (HON): Free Stock Analysis Report
TRANSDIGM GROUP (TDG): Free Stock Analysis Report
UTD TECHS CORP (UTX): Free Stock Analysis Report
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