TransDigm Group Inc. (TDG) reported first-quarter fiscal 2015 adjusted earnings (including share-based compensation expense) of $1.73 per share, which came above the year-ago quarter figure of $1.61 by 7.5%. However, it missed the Zacks Consensus Estimate of $1.84 by 6%. Also, shares of the company went down by 0.32% during the regular trading session on Jan 28, following the earnings release.
Excluding share-based compensation expense, the company reported adjusted earnings of $1.80 compared with $1.66 per share in the year-ago period.
The results were attributable to gains reaped from the strategic acquisitions in 2013, like Airborne and Elektro-Metall (EME). Ongoing improvement in the commercial aftermarket and strength in the commercial aerospace business were the other positives. However, earnings were partially offset by an increase in interest expenses.
Quarterly Details
Net sales in the quarter came in at $586.9 million, representing a year-over-year increase of 10.9%. However, it came below the Zacks Consensus Estimate of $602 million.
The year-over-year growth in net sales was primarily driven by strong performance of acquired firms like Airborne and Elektro-Metall (EME). Organic net sales growth accounted for 25% of the net sales increases.
TransDigm’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) escalated 10.7% year over year to $269.7 million.
Liquidity
TransDigm ended the quarter with cash and cash equivalents of $1.01 billion, as compared to $819.5 million as of Sep 30, 2014. The company’s long-term debt stood at $7.23 billion flat on a sequential basis.
On the other hand, TransDigm’s stockholder’s deficit stood at $1.46 billion, as against $1.56 billion as of Sep 30, 2014.
2015 Guidance Reiterated
TransDigm continues to expect its earnings per share in the range of $7.51 – $7.77 and adjusted earnings per share in the range of $8.03 – $8.29.
Also, the company reaffirmed its guidance for net income in the range of $429 – $443 million; net sales in the range of $2,510 – $2,550 million; and adjusted EBITDA in the range of $1,163 – $1,183 million.
Our View
Although TransDigm missed earnings and revenues estimates, the year-over-year growth in financials is encouraging. The company is expected to draw benefits from strong performance of its commercial aftermarket and commercial OEM businesses in the coming quarters.
TransDigm currently holds a Zacks Rank #3 (Hold). Other better-ranked stocks that look promising at the moment include Spirit AeroSystems Holdings, Inc. (SPR), Curtiss-Wright Corporation (CW) and Orbital Sciences Corp. (ORB). While Spirit AeroSystems sports a Zacks Rank #1 (Strong Buy), both Curtiss-Wright and Orbital Sciences carry a Zacks Rank #2 (Buy).
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