Shares of TransDigm Group Inc. TDG cumulatively decreased by about 4% since its earnings release, to close at $238.64 on Aug 5. The company’s third-quarter fiscal 2015 adjusted earnings (with share-based compensation adjustments) came in at $2.14, which missed the Zacks Consensus Estimate of $2.16 by a couple of cents.
Nonetheless, on a GAAP basis, the company reported earnings per share of $1.75, which improved significantly from a loss per share of $1.66 in the year-ago period.
The results were driven by a rise in net sales and strong performance of proprietary products. However, earnings were partially offset by an increase in interest expenses. Nevertheless, prompted by significant improvement, TransDigm upped its adjusted earnings and revenues outlook for fiscal 2015.
Inside the Headlines
Net sales in the quarter came in at $691.4 million, representing a year-over-year increase of 13.2%. However, it came below the Zacks Consensus Estimate of $729 million.
The year-over-year increase in net sales was attributable to strong contribution from the acquired firms – Telair Cargo Group and the aerospace businesses of Franke Aquarotter GmbH and Pexco LLC. About 80% of the net sales were garnered from these buyouts, while the rest was reaped from organic sales.
Also, TransDigm’s earnings before interest, taxes, depreciation and amortization (EBITDA) escalated 13.5% year over year to $312.9 million.
During the quarter under review, TransDigm completed the acquisition of the aerospace business of Franke Aquarotter GmbH – one of the leading German sanitary specialists – for around $75 million.
Also, the company completed the buyout of the aerospace business of Pexco LLC for about $496 million in cash.
Liquidity
TransDigm ended the quarter with cash and cash equivalents of $915.4 million, compared to $819.5 million as of Sep 30, 2014. The company’s long-term debt stood at $8.2 billion compared to $7.2 billion at the end of Sep 2014.
However, TransDigm has a high leverage and a stockholder’s deficit of $1.2 billion, as against $1.6 billion as of Dec 31, 2014.
2015 Guidance Raised
Based on the projection of positive synergies from the recent Pexco acquisition and enhanced first half of the year, TransDigm has raised its guidance for fiscal 2015.
TransDigm increased its adjusted earnings per share in the range of $8.64 – $8.78 from $8.49 – $8.75. Also, the company raised its net sales guidance in the range of $2,688 million to $2,710 million from $2,660 – $2,690 million.
Subsequent to Quarter-end Activities
On Jul 28, 2015, TransDigm penned a deal to acquire PneuDraulics, Inc. for about $325 million. The to-be-acquired company develops proprietary aerospace pneumatic and hydraulic components and subsystems specially meant for commercial transport, regional, business jet and military applications. The buyout is anticipated to complete by the end of fiscal year 2015, upon fulfillment of customary closing conditions and attainment of regulatory approvals.
Our View
Although TransDigm missed earnings and revenues estimates, the year-over-year growth in financials is encouraging. Going forward, the company is expected to draw benefits from the strong performance of its commercial transport aftermarket and strategic acquisitions.
TransDigm currently holds a Zacks Rank #3 (Hold). Other better-ranked stocks that look promising at the moment include Spirit AeroSystems Holdings, Inc. SPR, Aerojet Rocketdyne Holdings, Inc. AJRD and Kratos Defense & Security Solutions, Inc. KTOS. Both stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment