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Transdigm Group Inc. (TDG)
NYSE:TDG
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Transdigm Group
(NYSE:TDG)
Rating:63Neutral
Price Target:
$1,377.00
▲(4.95% Upside)
Positive Factors
Earnings Growth
TransDigm’s impressive margin expansion continued as the adjusted EBITDA margin reached 54.4% in the quarter, driven by operational efficiencies and the higher mix of aftermarket revenue.
Leadership Strategy
The incoming CEO's vision for Transdigm aligns with the outgoing CEO, focusing on mergers and acquisitions in the aerospace and defense space, with an emphasis on hardware.
Mergers and Acquisitions
TransDigm signed a definitive agreement to acquire Simmonds Precision Products from Goodrich Corp. for ~$765mn, expected to generate significant revenue in 2025.
Negative Factors
Financial Leverage
The special dividend will increase Transdigm's net debt to EBITDA to just over 6x, which may raise concerns about leverage.
Market Performance
Passenger growth in Transdigm's commercial aerospace aftermarket was below average last quarter, raising concerns about its performance in this segment.
Stock Performance
Shares of TransDigm traded down 12% after the company reported third-quarter results below consensus and lowered its full-year revenue outlook.
Transdigm Group (TDG) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$71.62B
Dividend YieldN/A
Average Volume (3M)379.86K
Price to Earnings (P/E)42.9
Beta (1Y)0.91
Revenue Growth12.86%
EPS Growth11.44%
CountryUS
Employees16,600
SectorIndustrials
Sector Strength73
IndustryAerospace & Defense
Share Statistics
EPS (TTM)9.60
Shares Outstanding56,350,285
10 Day Avg. Volume314,466
30 Day Avg. Volume379,858
Financial Highlights & Ratios
PEG Ratio3.42
Price to Book (P/B)-13.11
Price to Sales (P/S)10.39
P/FCF Ratio43.88
Enterprise Value/Market Cap1.53
Enterprise Value/Revenue12.75
Enterprise Value/Gross Profit22.08
Enterprise Value/Ebitda25.18
Forecast
1Y Price Target
$1,629.93Price Target Upside24.22% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering15
Transdigm Group Business Overview & Revenue Model
Company DescriptionTransdigm Group Incorporated (TDG) is a leading global designer, producer, and supplier of highly engineered aircraft components, primarily for commercial and military aerospace applications. The company operates through various sectors, including aerospace, defense, and government services, offering a wide range of products such as mechanical actuators, electrical power distribution, fuel systems, and other critical aerospace components. Transdigm focuses on proprietary, mission-critical products that enhance the safety and performance of aircraft.
How the Company Makes MoneyTransdigm Group generates revenue primarily through the sale of its proprietary aerospace components to original equipment manufacturers (OEMs) and aftermarket services. The company's revenue model is structured around both new part sales and aftermarket support, with a significant portion of earnings derived from long-term contracts and maintenance, repair, and overhaul (MRO) services. Key revenue streams include the sale of components used in aircraft production and the ongoing maintenance of existing aircraft fleets. Additionally, Transdigm benefits from strong relationships with major aerospace manufacturers and defense contractors, which provide a stable customer base and contribute to recurring revenue through aftermarket services. The company's focus on high-margin products and strategic acquisitions further enhances its profitability and market position.
Transdigm Group Key Performance Indicators (KPIs)
Any
EBITDA by Segment
Shows earnings before interest, taxes, depreciation, and amortization for each business segment, highlighting which areas are most profitable and where there might be opportunities or challenges in cost management.
Shows earnings before interest, taxes, depreciation, and amortization for each business segment, highlighting which areas are most profitable and where there might be opportunities or challenges in cost management.
Data provided by:
Main Street Data
Main Street DataTransdigm Group Earnings Call Summary
Earnings Call Date:Aug 05, 2025
(Q3-2025)
| % Change Since: |
Next Earnings Date:Nov 06, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong EBITDA margins, cash flow, and successful acquisitions, but faced challenges in commercial OEM revenue and sales guidance. Overall, the sentiment is balanced with positive financial performance and strategic growth efforts countered by specific market challenges.Q3-2025 Updates
Positive Updates
Strong EBITDA Margin
EBITDA as defined margin was 54.4% in Q3, driven by growth in commercial aftermarket and operating strategy focus.
Robust Operating Cash Flow
Q3 operating cash flow exceeded $630 million with a cash balance of almost $2.8 billion.
Increase in EBITDA Guidance
Full fiscal year 2025 EBITDA guidance increased by $40 million to $4.725 billion, reflecting a margin of around 53.8%.
Successful M&A Activity
Completed acquisition of Servotronics for $138 million and agreed to acquire Simmonds Precision for $765 million, expected to generate significant revenue.
Defense Revenue Growth
Defense market revenue grew by approximately 13% compared to the prior year period, supported by strong bookings.
Negative Updates
Commercial OEM Revenue Decline
Commercial OEM revenue was down 7% in Q3 compared to the prior year due to production rate challenges at Boeing and Airbus.
Lowered Sales Guidance
Full fiscal year 2025 sales guidance reduced by $60 million due to lower commercial OEM build rates and inventory destocking.
Aftermarket Revenue Moderation
While still growing, commercial aftermarket revenue growth moderated to 6%, influenced by non-engine passenger segment performance.
Temporary OEM Revenue Headwinds
OEM revenue decline attributed to lingering effects of Boeing strike and Airbus production ramp challenges.
Company Guidance
In the Q3 2025 earnings call, TransDigm Group Inc. provided updated guidance for the fiscal year, adjusting their sales and EBITDA expectations. The company revised its full fiscal year sales guidance down by $60 million, now anticipating a midpoint revenue of $8.79 billion, reflecting an 11% increase over the prior year. This adjustment was primarily due to lower-than-expected commercial OEM build rates and inventory destocking. Conversely, the EBITDA guidance was raised by $40 million to a midpoint of $4.725 billion, representing a 13% increase with an expected margin of 53.8%. The adjusted EPS is projected to be $36.74, an 8% rise. The company's strong performance in the commercial aftermarket and defense market channels contributed significantly to the robust EBITDA margin of 54.4% in the quarter. Additionally, TransDigm reported a significant operating cash flow of over $630 million and ended the quarter with a cash balance of nearly $2.8 billion.Transdigm Group Financial Statement Overview
Summary
Transdigm Group demonstrates strong profitability and cash flow generation, crucial for sustaining operations and growth. However, high leverage and negative equity pose financial risks, impacting the overall financial performance score.Income Statement
Transdigm Group shows strong profitability with a consistent increase in revenue and margins over the years. The TTM data reveals a gross profit margin of 57.7% and a net profit margin of 20.4%, indicating efficient cost management and strong bottom-line performance. Revenue growth is steady at 2.3% TTM, reflecting resilience in the aerospace and defense sector.85
Very Positive
Balance Sheet
The balance sheet highlights significant leverage with a negative stockholders' equity, resulting in a high debt-to-equity ratio of -5.0 TTM. This indicates potential financial risk, although the company has managed to maintain operations effectively. Return on equity is negative, reflecting the impact of high debt levels on shareholder returns.45
Neutral
Cash Flow
Cash flow analysis shows robust free cash flow growth of 26.3% TTM, supporting operational flexibility. The operating cash flow to net income ratio is strong at 0.95, suggesting efficient cash generation relative to earnings. The free cash flow to net income ratio of 0.91 further underscores the company's ability to convert profits into cash.78
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 8.58B | 7.94B | 6.58B | 5.44B | 4.80B | 5.11B |
| Gross Profit | 4.95B | 4.56B | 3.75B | 2.94B | 2.42B | 2.55B |
| EBITDA | 4.34B | 3.87B | 3.20B | 2.46B | 2.06B | 2.08B |
| Net Income | 1.75B | 1.48B | 1.26B | 780.00M | 607.00M | 474.00M |
Balance Sheet | ||||||
| Total Assets | 22.70B | 25.59B | 19.97B | 18.11B | 19.32B | 18.39B |
| Cash, Cash Equivalents and Short-Term Investments | 2.79B | 6.26B | 3.47B | 3.00B | 4.79B | 4.72B |
| Total Debt | 25.01B | 24.90B | 19.77B | 19.81B | 20.02B | 20.03B |
| Total Liabilities | 27.70B | 31.87B | 21.95B | 21.87B | 22.23B | 22.36B |
| Stockholders Equity | -5.00B | -6.29B | -1.98B | -3.77B | -2.92B | -3.97B |
Cash Flow | ||||||
| Free Cash Flow | 1.91B | 1.88B | 1.24B | 829.00M | 808.00M | 1.11B |
| Operating Cash Flow | 2.10B | 2.04B | 1.38B | 948.00M | 913.00M | 1.21B |
| Investing Cash Flow | -1.05B | -2.44B | -900.00M | -553.00M | -785.00M | 799.00M |
| Financing Cash Flow | -1.65B | 3.17B | -16.00M | -2.15B | -70.00M | 1.23B |
Transdigm Group Technical Analysis
Neutral
1312.09
Price Trends
1388.32
Negative
1358.97
Negative
1293.76
Positive
Market Momentum
-24.97
Negative
45.93
Neutral
23.56
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TDG, the sentiment is Neutral. The current price of 1312.09 is above the 20-day moving average (MA) of 1305.15, below the 50-day MA of 1388.32, and above the 200-day MA of 1293.76, indicating a neutral trend. The MACD of -24.97 indicates Negative momentum. The RSI at 45.93 is Neutral, neither overbought nor oversold. The STOCH value of 23.56 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $86.81B | 21.67 | 17.91% | 1.82% | 11.85% | 16.12% | |
78 Outperform | $50.96B | 30.41 | 8.90% | 1.76% | 2.93% | 43.29% | |
77 Outperform | $83.32B | 21.40 | 26.50% | 1.53% | -0.65% | 77.20% | |
76 Outperform | $38.61B | 69.56 | 16.71% | 0.07% | 13.46% | 33.75% | |
71 Outperform | $108.30B | 26.12 | 73.06% | 2.89% | 1.09% | -35.50% | |
63 Neutral | $10.73B | 15.32 | 7.37% | 2.01% | 2.86% | -14.57% | |
63 Neutral | $71.62B | 42.93 | -29.16% | ― | 12.86% | 11.44% |
* Industrials Sector Average
Performance Comparison
TDG
Transdigm Group
1,312.09
135.17
11.49%
GD
General Dynamics
321.33
27.89
9.50%
LHX
L3Harris Technologies
270.71
48.09
21.60%
HEI
HEICO
316.41
62.26
24.50%
LMT
Lockheed Martin
457.06
-94.39
-17.12%
NOC
Northrop Grumman
571.63
64.59
12.74%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.