Aerospace and defense components maker TransDigm topped estimates for Q3 results early Tuesday. TDG stock is trading near all-time highs and just below a buy point after earnings.
Cleveland, Ohio-based TransDigm makes highly engineered parts and devices used in commercial and military aircraft, as well as proprietary products for defense applications. Its products include ignition systems, pumps, flight controls, cockpit displays and radio systems.
TransDigm reported a 49% spike in adjusted earnings to $7.25 per share while revenue increased 24.7% to $1.74 billion.
Analysts expected adjusted earnings to leap 31.6% to $6.38 per share on 20.6% revenue growth to $1.69 billion.
TransDigm averaged nearly 46% earnings growth the last four quarters, with earnings accelerating the last two periods. Revenue averaged a 17.5% increase over the last four quarters.
TransDigm upgraded its 2023 outlook and noted further progression in the commercial aerospace market recovery. The company guided adjusted earnings between $24.94 and $25.36 per share, compared to $17.14 per share last year. TransDigm sees fiscal 2023 revenue ranging from $6.525 billion and $6.585 billion, increasing from $5.429 billion in 2022.
FactSet expects fiscal 2023 earnings of $24.05 per share on $6.46 billion in revenue.
Truist raised its price target on TDG stock to 1,044 from 870 on July 21 and maintained a buy rating on shares as part of a broader aerospace and defense research note. The firm wrote that easing recession fears and stable demand trends bode well for the firm's industrial clients. However, the setup for commercial aerospace and defense looks a bit more challenging. Truist added lofty valuations and strong performance year-to-date could drive "sell-the-news" responses to results.
On July 6, Citi analyst Jason Gursky started coverage on TDG stock with a buy rating and 1,042 price target. He cited rising global air traffic, the healthy outlook for production of new aircraft and growing defense budgets. Gursky also noted TransDigm's focus on proprietary products gives it pricing power and margin-expansion potential.
Defense giant Lockheed Martin topped forecasts for Q2 results in mid-July. Meanwhile RTX, formerly known as Raytheon Technologies, disclosed a major engine defect in its earnings beat on July 25.
TDG Stock
TransDigm stock slumped 2.9% to 888.04 Tuesday after climbing to a record high of 940 intraday. TDG stock gained 2% to 914.08 Monday leading up to the report.
TDG has closed tight for five consecutive weeks, ending up or down by no more than 1.5% since the end of June. That created a level of resistance suggesting a buy point around 899.97, putting shares in a buy zone.
TDG stock soared 41% so far this year.
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