TransDigm Group is the latest defense stock to report its June-quarter performance, delivering results early Tuesday. The aerospace parts manufacturer extended its track record for earnings and revenue growth to a fifth quarter. But revenue growth stopped short of the analyst target, and management suspended its full-year guidance. TDG stock closed the trading day up by a hair.
Cleveland-based TransDigm Group has 47 subsidiaries that manufacture a various components for military and commercial airplanes and helicopters. The parts in their product portfolio range from valves and pumps to radio equipment, batteries, motors, power controls and cockpit displays and systems.
Company earnings have been on a tear recently. TransDigm's EPS leapt an average 66% over the past four quarters. Its sales grew a less impressive 11.75%, on average, during that period.
For the company's fiscal third quarter, adjusted earnings jumped 46% to $4.85 per share from $3.33 per share last year. Revenue increased 15% to $1.38 billion over the year, but fell just short of Wall Street expectations. Analysts forecast TDG to report 31% earnings growth to $4.39 per share and 16.7% revenue growth to $1.403 billion.
"This was a result of the continued recovery in commercial aftermarket revenues, coupled with careful management of our cost structure and focus on our operating strategy," CEO Kevin Stein stated in the announcement.
So far this year, TDG spent $245 million on share repurchases and announced a dividend of $18.50 per share with the second quarter results.
Back in May, TransDigm completed the acquisition of Montreal-based DART Aerospace for $360 million in cash. The civilian helicopter engineering and equipment company is expected to generate $100 million in pro forma revenues for the 2022 calendar year.
All together, TransDigm deployed $2.4 billion on the DART acquisition, dividends and stock buybacks year-to-date.
TransDigm Suspends Outlook
However, TransDigm suspended its fiscal 2022 outlook in its report, citing uncertainty around the extent of business disruptions related to the Covid-19 pandemic. The company says production delays have affected its primary original equipment manufacturer (OEM) markets and commercial aftermarket operations.
Still, Stein believes commercial aerospace is recovering.
"Global air traffic continues to trend upward with the pent-up demand for air travel. This positive momentum bodes well for the commercial aerospace recovery," stated Kevin Stein, TransDigm Group's President and Chief Executive Officer. "Domestic air travel remains the leader in the air traffic recovery, but the international air traffic recovery made strides these past few months as more passengers returned to long-haul travel."
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TDG Stock Analysis
TransDigm stock is attempting a breakout from an 18-week double-bottom base. TDG stock is trading above its buy point of 633.44. The buy range tops out at $665.11. Buy ranges extend 5% above a buy point.
TDG stock was flat premarket, as investors digested the disappointing announcement and revenue miss. Investors with a position should be aware of sell rules to prevent losses. One rule of thumb is to cut losses after a 7% drop from a stock's buy point.
TransDigm has a Composite Rating of 88, which combines a number of key technical indicators and has a maximum rating of 99. TDG stock has a Relative Strength Rating of 86 out of a possible 99, indicating strong performance against its peers in the S&P 500 over the last 12 months. TransDigm has an EPS Rating of 82.
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