Zacks Investment Research downgraded shares of TransDigm Group Incorporated (TDG) from NEUTRAL to UNDERPERFORM on September 25, 2013, with a target price of $124.00.
TransDigm Group is a leading global designer, producer and supplier of highly engineered aircraft components. We have downgraded our recommendation on TransDigm Group to Underperform from Neutral with a target price of $124. The aircraft components company delivered strong third-quarter results. However, the company's debt burden, higher interest expense and lowered net income and earnings guidance remain concerns in the near term. During the third quarter, the board approved a special dividend of $22 per share, which was a robust increase of almost 71.2% from its last payout of $12.85 – a special dividend paid last November. In order to fund this payout, the company had raised $1.4 billion in July, which further pressurized its interest expense that was already high. This is expected to hit the bottom line, going forward. Further, with about three to four acquisitions on board, it might take some time for TransDigm to properly integrate them into its existing business. Thus, the acquisitions may not be immediately accretive.
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