TransDigm (TDG) Beats On Q2 Earnings, FY17 View Positive
Zacks Investment Research | May 08, 2017 10:21PM ET
TransDigm Group Incorporated (NYSE:TDG) reported its fourth successive earnings beat, as second-quarter fiscal 2017 adjusted earnings came in at $2.88 per share (including stock-based compensation adjustments), comfortably beating the Zacks Consensus Estimate of $2.85.
The figure fared even better in year-over-year comparison, rising 5.9% from the year-ago quarter’s adjusted figure of $2.72.
The bottom-line growth came on the back of robust top-line performance and improvements in operating margin. Also, consistent efforts to boost productivity, favorable product mix and lower acquisition-related costs proved conducive to the earnings growth.
Inside the Headlines
Net sales for the quarter came in at $873.2 million, representing an impressive year-over-year growth of 9.6%. However, the top line lagged the Zacks Consensus Estimate of $886 million.
Decent growth in Defense (up 3% year over year) and Commercial OEM (up 2%) revenues supplemented the top-line performance. Furthermore, contributions from the previously completed acquisitions and favorable product mix supported the sales performance.
Majority of the company’s commercial aftermarket businesses saw year-over-year revenue growth. Overall, the soft commercial aftermarket revenue growth was mostly offset by stronger defense revenues. Further, year-to-date commercial aftermarket bookings for the company are running ahead of shipments, which bodes well for the company’s performance in the upcoming quarters.
TransDigm’s EBITDA (earnings before interest, taxes, depreciation and amortization) grew 16.5% year over year to $397.7 million.
Acquisitions
In February, TransDigm announced the acquisition of SCHROTH Safety Products GmbH, and aviation & defense assets and liabilities of Takata Corporation, for a total of $90 million in cash. The acquired units will operate as a single business – SCHROTH – and will focus on designing and manufacturing proprietary, highly engineered, advanced safety systems for aviation, racing, and military ground vehicles.
SCHROTH Safety Products comprises the lion’s share of revenues (about 90%) in this deal. In this transaction, most of the revenues will come from proprietary products, with aftermarket content accounting for approximately 40% of the revenues, and aerospace & defense representing 80% of the revenues. This move reflects TransDigm’s strategy to acquire proprietary aerospace businesses with significant aftermarket content, in a bid to fortify its core business. Given that SCHROTH has a growing aftermarket presence on attractive high-use platforms, TransDigm believes that it will contribute significantly toward its core business.
Transdigm Group Incorporated Price, Consensus and EPS Surprise
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