Shares of TransDigm Group Inc. (TDG) gained 2.9% in yesterday’s trading session after reporting strong fourth-quarter and fiscal 2014 (ended Sep 30, 2014) results. The company’s adjusted earnings (including share-based compensation expense) of $2.10 a share comfortably surpassed the Zacks Consensus Estimate of $1.94 by 8.2%. Earnings also improved 22.1% from the prior-year quarter figure of $1.72. Excluding share-based compensation expense, the company reported adjusted earnings of $2.21 compared with $1.75 per share in the year-ago period.
For fiscal 2014, TransDigm reported adjusted earnings (including share-based compensation expense) of $7.44 per share, a significant improvement from $6.90 reported in the previous year. Excluding share-based compensation expense, the company reported adjusted earnings of $7.76 compared with $6.90 per share in the last fiscal.
The quarterly results were driven by strategic acquisitions closed by the company last year, like Aerosonic, Airborne, Arkwin, Whippany and Elektro-Metall (EME). Ongoing improvement in the commercial aftermarket and strength in commercial aerospace business were the other positives. However, earnings were partially offset by an increase in interest expense and acquisition-related costs in the quarter.
Quarterly Details
Net sales in the quarter came in at $642.2 million, representing a year-over-year increase of 19% from $539.7 million reported in the preceding year. Organic net sales rose 10.1% year over year. Quarterly revenue growth was driven by impressive commercial aftermarket sales and strong performance of acquired firms like Airborne and Elektro-Metall (EME). Revenues also surpassed the Zacks Consensus Estimate of $639 million.
TransDigm’s net sales for fiscal 2014 surged 23.3% to $2,372.9 million, while organically, net sales marked a year over year improvement of 8.1%.
TransDigm reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $291.1 million, an increase of 17.3% from $248.2 million in the prior-year quarter.
Other Financial Details
TransDigm ended the fiscal year with cash and cash equivalents of $819.5 million, long-term debt of $7,233.8 million and stockholder’s deficit of $1,556.1 million.
The company reported cash from operating activities of $541.2 million for fiscal 2014, compared with $470.2 million reported in the prior year.
Outlook
TransDigm also provided guidance for fiscal 2015. The company expects strong revenues from its commercial aftermarket and commercial OEM businesses. However, defense revenues are likely to be flat in fiscal 2015.
The company trimmed its guidance for earnings per share to the range of $7.51 – $7.77 compared with $3.16 per share reported in fiscal 2014. Adjusted earnings per share are expected in the range of $8.03 – $8.29 a share, compared with the reported figure of $7.76 for fiscal 2014.
Net income is likely to range in $429 – $443 million, versus $307 million in fiscal 2014.
TransDigm expects fiscal 2014 net sales in the range of $2,510 – $2,550 million versus $2,373 million in fiscal 2014.
Adjusted EBITDA is presently expected in the range of $1,163 – $1,183 million, higher than $1,073 million reported for fiscal 2014.
Zacks Rank
TransDigm currently holds a Zacks Rank #4 (Sell). Other better-ranked stocks that look promising at the moment include Spirit AeroSystems Holdings, Inc. (SPR), Esterline Technologies Corp. (ESL) and Hexcel Corp. (HXL). While Spirit AeroSystems sports a Zacks Rank #1 (Strong Buy), both Esterline Technologies and Hexcel carry a Zacks Rank #2 (Buy).
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