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Transdigm Group Inc. (TDG)
NYSE:TDG
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Transdigm Group
(NYSE:TDG)
68Neutral
Positive Factors
Aftermarket sales
TDG's commercial aftermarket guidance is affirmed with expectations of sales acceleration, supported by strong growth in the distribution channel.
Mergers and acquisitions
Analyst believes TDG has substantial cash to deploy for mergers and acquisitions, dividends, and share repurchases, enhancing future growth potential.
Stock repurchase
TDG's history of buying back its own stock at opportune moments is seen as a bullish sign for the stock.
Negative Factors
Commercial aftermarket growth
Aftermarket fears persist as commercial aftermarket growth was softer than the group average.
Growth outlook
The full year outlook suggests a sequential acceleration, but also implies lower growth in Q2-4 compared to Q1.
OEM revenue decline
Commercial OEM revenue was down 4% YoY with commercial transport revenue down 1% YoY and business jet/helicopter revenue down 8% YoY.
Transdigm Group (TDG) vs. S&P 500 (SPY)
Market Cap
$73.87B
Dividend YieldN/A
Average Volume (3M)280.21K
Price to Earnings (P/E)46.5
Beta (1Y)0.99
Revenue Growth16.89%
EPS Growth20.33%
CountryUS
Employees16,600
SectorIndustrials
Sector Strength61
IndustryAerospace & Defense
Share Statistics
EPS (TTM)28.34
Shares Outstanding56,084,587
10 Day Avg. Volume343,507
30 Day Avg. Volume280,206
Financial Highlights & Ratios
PEG Ratio2.29
Price to Book (P/B)N/A
Price to Sales (P/S)9.26
Price to Cash Flow (P/CF)25.10
P/FCF Ratio26.60
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$1,513.67Price Target Upside16.60% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering12
Transdigm Group Business Overview & Revenue Model
Company DescriptionTransDigm Group Incorporated designs, produces, and supplies aircraft components in the United States and internationally. Its Power & Control segment offers mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, databus and power controls, sensor products, switches and relay panels, hoists, winches and lifting devices, and cargo loading and handling systems. This segment serves engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies, and repair depots. The company's Airframe segment provides engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, cockpit security components and systems, cockpit displays, engineered audio, radio and antenna systems, lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, thermal protection and insulation products, lighting and control technology, and parachutes. This segment serves airframe manufacturers, cabin system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies, and repair depots. Its Non-aviation segment offers seat belts and safety restraints for ground transportation applications; electro-mechanical actuators for space applications; hydraulic/electromechanical actuators and fuel valves for land-based gas turbines; refueling systems for heavy equipment used in mining, construction, and other industries; and turbine controls for the energy and oil and gas markets. This segment serves off-road vehicle and subsystem suppliers, child restraint system suppliers, and satellite and space system suppliers; and manufacturers of heavy equipment. TransDigm Group Incorporated was founded in 1993 and is based in Cleveland, Ohio.
How the Company Makes MoneyTransDigm Group generates revenue through the design, manufacture, and sale of aerospace components and systems. The company's revenue model is based on both original equipment manufacturers (OEM) sales and aftermarket sales. OEM sales involve selling components directly to aircraft manufacturers, while aftermarket sales include providing parts and services for maintenance, repair, and overhaul of existing aircraft. The aftermarket segment tends to be more profitable due to the higher margins associated with replacement parts and ongoing maintenance services. TransDigm also benefits from long-term supply agreements and proprietary products, which allow for pricing power and recurring revenue streams. Additionally, the company has engaged in strategic acquisitions to expand its product offerings and market reach, further enhancing its revenue potential.
Transdigm Group Financial Statement Overview
Summary
Transdigm Group shows strong profitability and cash flow generation. Despite high leverage and negative equity, operational efficiency and revenue growth position the company positively, especially in the aerospace and defense industry.Income Statement
The company demonstrates a strong revenue growth rate of 2.71% TTM, with robust gross and net profit margins of 58.74% and 22.38% respectively. EBIT and EBITDA margins are also impressive at 45.98% and 50.31%, indicating efficient operations and profitability.85
Very Positive
Balance Sheet
The balance sheet reveals significant leverage, with a negative stockholders' equity resulting in a high debt-to-equity ratio, which presents financial risk. However, the company's ability to generate profits could help manage this leverage.40
Negative
Cash Flow
The company exhibits strong cash flow management, with a 5.85% growth in free cash flow. The operating cash flow to net income ratio of 1.18 suggests healthy cash conversion from earnings, supporting liquidity.78
Positive
| Breakdown | |||||
| TTM | Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 | Sep 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 8.15B | 7.94B | 6.58B | 5.43B | 4.80B | 5.10B | Gross Profit |
| 4.79B | 4.67B | 3.84B | 3.10B | 2.51B | 2.65B | EBIT |
| 3.75B | 3.53B | 2.92B | 2.21B | 1.69B | 1.75B | EBITDA |
| 4.10B | 3.87B | 3.21B | 2.46B | 2.06B | 2.05B | Net Income Common Stockholders |
| 1.82B | 1.71B | 1.30B | 866.00M | 680.00M | 699.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 234.31M | 6.26B | 3.58B | 3.00B | 4.79B | 4.72B | Total Assets |
| 4.21B | 25.59B | 19.97B | 18.11B | 19.32B | 18.39B | Total Debt |
| 3.18B | 24.90B | 19.60B | 19.81B | 20.02B | 20.01B | Net Debt |
| 2.95B | 18.64B | 16.13B | 16.81B | 15.23B | 15.29B | Total Liabilities |
| 3.62B | 31.87B | 21.95B | 21.87B | 22.23B | 22.36B | Stockholders Equity |
| 596.26M | -6.29B | -1.98B | -3.77B | -2.92B | -3.97B |
| Cash Flow | Free Cash Flow | ||||
| 1.99B | 1.88B | 1.24B | 829.00M | 808.00M | 1.11B | Operating Cash Flow |
| 2.16B | 2.04B | 1.38B | 948.00M | 913.00M | 1.21B | Investing Cash Flow |
| -2.42B | -2.44B | -900.00M | -553.00M | -785.00M | 799.00M | Financing Cash Flow |
| -1.41B | 3.17B | -16.00M | -2.15B | -70.00M | 1.23B |
Transdigm Group Technical Analysis
Negative
1298.20
Price Trends
1339.31
Negative
1310.69
Negative
1291.65
Positive
Market Momentum
14.77
Negative
60.38
Neutral
73.08
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TDG, the sentiment is Negative. The current price of 1298.2 is below the 20-day moving average (MA) of 1346.71, below the 50-day MA of 1339.31, and above the 200-day MA of 1291.65, indicating a neutral trend. The MACD of 14.77 indicates Negative momentum. The RSI at 60.38 is Neutral, neither overbought nor oversold. The STOCH value of 73.08 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TDG.
Transdigm Group Risk Analysis
Transdigm Group disclosed 30 risk factors in its most recent earnings report. Transdigm Group reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Transdigm Group Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $73.84B | 18.08 | 27.75% | 1.61% | 4.44% | 110.33% | |
78 Outperform | $30.99B | 62.73 | 16.18% | 0.09% | 23.06% | 32.43% | |
76 Outperform | $40.24B | 27.21 | 7.85% | 2.18% | 9.82% | 22.33% | |
75 Outperform | $66.47B | 18.17 | 17.44% | 2.09% | 12.88% | 13.78% | |
74 Outperform | $108.43B | 20.72 | 81.04% | 2.79% | 5.14% | -19.14% | |
68 Neutral | $73.87B | 46.47 | -29.16% | ― | 16.89% | 20.33% | |
62 Neutral | $7.68B | 13.06 | 3.21% | 3.34% | 3.62% | -14.40% |
* Industrials Sector Average
Performance Comparison
TDG
Transdigm Group
1,298.20
128.54
10.99%
GD
General Dynamics
271.82
-11.37
-4.01%
LHX
L3Harris Technologies
213.51
15.19
7.66%
HEI
HEICO
249.41
55.81
28.83%
LMT
Lockheed Martin
463.70
22.94
5.20%
NOC
Northrop Grumman
516.09
66.00
14.66%
Transdigm Group Earnings Call Summary
Earnings Call Date: Feb 4, 2025 | % Change Since: -4.03% | Next Earnings Date: May 13, 2025
Earnings Call Sentiment Neutral
The earnings call reflected a strong start to fiscal year 2025 with robust growth in commercial aftermarket and defense channels, significant cash flow generation, and strategic share repurchases. However, challenges remain in the commercial OEM segment due to the Boeing machinist strike and uncertainty in production rates. The interiors segment of the aftermarket continues to lag behind pre-pandemic levels.Highlights
Strong Start to Fiscal Year 2025
TransDigm reported healthy growth in revenues for both commercial aftermarket and defense market channels. Operating cash flow generation was over $750 million with a cash balance of almost $2.5 billion.
Commercial Aftermarket and Defense Growth
Total commercial aftermarket revenue increased by approximately 9% compared to the prior year period. Defense market revenue grew by approximately 11% compared to the prior year period.
Share Repurchases
TransDigm repurchased approximately 250,000 shares, deploying just over $300 million of capital, reflecting confidence in their long-term return objectives.
Record Cash Flow
Free cash flow was over $800 million for the quarter, and the company expects to generate approximately $2.3 billion of free cash flow for the full fiscal year 2025.
Opportunities in M&A
The company continues to see an expanding pipeline of potential M&A targets, and does not expect this environment to slow down in the near term.
Lowlights
Commercial OEM Revenue Decline
Commercial OEM revenue decreased by approximately 4% in Q1 compared to the prior year period, impacted by the Boeing machinist strike affecting production lines.
Boeing Strike Impact
The Boeing machinist strike lasted roughly 12 weeks, impacting TransDigm's commercial OEM business and contributing to a sequential contraction of total commercial OEM revenues by 17% in Q1.
Uncertainty in OEM Production Rates
There is ongoing uncertainty regarding commercial OEM production rate progression and supply chain impacts as Boeing recovers from the machinist strike.
Interiors Segment Below 2019 Levels
The interiors segment of the commercial aftermarket remains below pre-pandemic levels, driven by a slower recovery in the refurb market.
Company Guidance
During the TransDigm Group's Q1 2025 Earnings Conference Call, the company provided guidance for fiscal year 2025, maintaining its prior projections despite strong first-quarter results. The midpoint of revenue guidance remains at $8.85 billion, representing an approximate 11% increase, with specific growth rate assumptions for market channels: mid-single-digit growth for commercial OEM, high single-digit to low double-digit growth for commercial aftermarket, and high single-digit growth for defense. The EBITDA guidance midpoint is $4.685 billion, an approximate 12% increase, with a margin expectation of around 52.9%. Adjusted EPS guidance has been slightly raised to $36.47, reflecting a 7% increase, due to share repurchases totaling approximately 250,000 shares at an average price of $1,249 per share. The company highlighted its strong start to the fiscal year with a 52.9% EBITDA margin, operating cash flow generation exceeding $750 million, and cash reserves of nearly $2.5 billion, while also discussing ongoing M&A activities and an active pipeline of potential targets.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.