TransDigm Group Incorporated (TDG) reported strong first-quarter fiscal 2014 results on Feb 4, 2014, after which the stock gained 0.9% on Feb 5 and 0.2% on Feb 6, 2014. Following the earnings results, although the estimates for fiscal 2014 contracted 1.7%, the estimates for fiscal 2015 surged 4.0%. First-quarter results were primarily driven by the company’s strategic acquisitions in fiscal 2013, improving commercial aftermarket and strength in commercial aerospace.
This maker of components for commercial and military aircrafts reported adjusted earnings per share of $1.66, which comfortably surpassed the Zacks Consensus Estimate of $1.28, by 29.7%. The 10% per share increase was lower than the 15.2% increase of adjusted net income, primarily due to the higher share count in the quarter.
On GAAP basis, net income increased 16.1% year over year to $86.1 million, while GAAP earnings were reported at $1.44 cents per share, up from 66 cents per share in the prior-year quarter.
Revenues
Net sales in the quarter totaled $529.3 million, representing a year-over-year increase of 23.0%. Organic net sales growth was up 9.1% from the prior-year period, driven by contribution from acquisitions of Aerosonic and Arkwin, while Whippany Actuation contributed the balance increase to the top line. Revenues also surpassed the Zacks Consensus Estimate of $507 million.
Margins
TransDigm reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter at $243.6 million, which increased 21.2% from $200.9 million in the prior-year quarter.
EBITDA before adjustments grew 23.2% to $234.5 million versus $190.3 million in the comparable prior-year quarter.
Balance Sheet and Cash Flow
Exiting the first quarter, the company had cash from operating activities of $115.7 million, while it had cash and cash equivalents of $410.9 million. The company has a long term debt of $5.7 billion.
Revised Outlook
TransDigm expects to reap positive synergies from its three recent acquisitions and to specially highlight the benefits of the Airborne Systems acquisition, it has raised its outlook for fiscal 2014. The company now expects net sales to be in the range of $2.28 billion to $2.34 billion compared with a guidance of $2.1–$2.2 billion provided earlier.
TransDigm expects fiscal 2014 net income to be in the range of $375 million to $393 million versus the earlier range of $372–$390 million.
Adjusted earnings per share are expected to be in the range of $7.35 a share to $7.65 a share, compared with the previous guidance of $7.00 to $7.32.
Adjusted EBITDA is expected to be in the range of $1,036 million to $1,064 million, versus the previous range of $1,004 million to $1,032 million.
TransDigm currently holds a Zacks Rank #2 (Buy). Some other stocks that are worth considering and carry a Zacks Rank #1 (Strong Buy) in the Aerospace sector include Alliant Techsystems Inc. (ATK), BAE Systems plc. (BAESY) and Spirit AeroSystems Holdings, Inc. (SPR).
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