The U.S. aerospace and defense sector is one of the largest in terms of infrastructure and manufacturing activities. The market is expected to grow primarily due to the armed forces' procurement and upgrade activities to counter emerging threats.
Several contracts from the military and Air Force are underway, and many new contracts are anticipated to be dispersed, creating a parallel demand for defense equipment.
Additionally, according to Precedence Research, the global aerospace market size is expected to reach around $791.78 billion by 2034, growing at a CAGR of 7.8% from 2024 and 2034. The growing curiosity about exploring outer space encourages market players to invest in R&D programs.
Against this backdrop, let’s compare two established aerospace stocks to analyze which aerospace stock is a better investment: TransDigm Group Incorporated (TDG) and Cadre Holdings, Inc. (CDRE).
The Case for TransDigm Group Incorporated Stock
With a $70.87 billion market cap, TransDigm Group Incorporated (TDG) designs, produces, and supplies aircraft components in the United States and internationally.
On July 31, TDG announced the successful completion of its $655 million acquisition of Raptor Labs Holdco, LLC, a L Squared Capital Partners portfolio company. Raptor Scientific is renowned for its advanced test and measurement solutions, primarily serving the aerospace and defense sectors.
The integration of Raptor Scientific can foster growth by expanding TDG’s product offerings, creating new market opportunities, and boosting its competitive position within the growing aerospace aftermarket.
TDG’s stock has gained 29.9% over the past year to close the last trading session at $1260.32.
TDG’s trailing-12-month gross profit margin and EBIT margin of 58.84% and 45.04% are 83.70% and 333.7% higher than the industry average of 32.03% and 10.38%, respectively. Its trailing-12-month net income margin of 21.59% is 230.1% higher than the industry average of 6.54%.
For the fiscal fourth quarter that ended September 30, 2024, TDG’s net sales increased 18% year-over-year to $2.19 billion. Its gross profit rose 15.3% from the year-ago value to $1.26 billion.
Additionally, the company’s adjusted net income and adjusted EPS grew 23.9% and 22.4% from the prior year’s quarter to $570 million and $9.83, respectively. As of September 30, 2024, TDG’s cash and cash equivalents amounted to $6.26 billion, compared to $3.47 billion on September 30, 2023.
Analysts predict TDG’s revenue and EPS for the fiscal 2025 first quarter (ending December 2024) to rise by 13.1% and 8.1% year-over-year, reaching $2.02 billion and $7.74, respectively. The company has consistently exceeded consensus revenue and EPS estimates in each of the four trailing quarters, which is noteworthy.
TDG’s POWR Ratings reflect robust prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TDG is ranked #21 out of 71 stocks in the Air/Defense Services industry. It has a B grade for Quality, Momentum, and Stability. To see TDG’s Growth, Sentiment, and Value ratings, click here.
The Case for Cadre Holdings, Inc. Stock
Valued at $1.36 billion by market cap, Cadre Holdings, Inc. (CDRE) manufactures and distributes safety that provides protection to users in hazardous or life-threatening situations in the United States and internationally. The company operates in two segments: Products and Distribution.
CDRE’s stock has gained 4.6% over the past year to close the last trading session at $33.48 but plunged 10.9% over the past month.
CDRE’s trailing-12-month gross profit margin and EBIT margin of 40.67% and 11.88% are 26.96% and 14.4% higher than the industry average of 32.03% and 10.38%, respectively. However, its trailing-12-month net income margin of 6.34% is 3% lower than the industry average of 6.54%.
For the fiscal third quarter that ended September 30, 2024, CDRE’s net sales were reported at $109.41 million. The company’s gross profit stood at $40.02 million. However, its net income and net income per share declined 66.9% and 69% year-over-year to $3.66 million and $0.09, respectively.
Analysts expect CDRE’s revenue for the quarter ending December 2024 to increase 37.9% year-over-year to $171.77 million. Its EPS is expected to grow 90% year-over-year to $0.48 for the same quarter. It surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
CDRE’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, translating to Neutral in our proprietary rating system.
CDRE has a C grade for Value, Stability Sentiment, and Growth. It is ranked #29 in the same industry.
Click here for the additional POWR Ratings for CDRE (Momentum and Quality).
TransDigm Group (TDG) vs. Cadre Holdings (CDRE): Which Aerospace & Defense Stock Is a Better Investment?
The aerospace market has witnessed significant growth over the years. It is anticipated to grow rapidly due to the increasing military and defense spending and the rising advancements in aviation technology, such as propulsion systems, advanced materials, satellite communication, and space exploration programs.
Leading aerospace companies TDG and CDRE stand to capitalize on the optimistic industry outlook. However, TDG’s higher profitability and promising near-term outlook favor it as the better aerospace stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Air/Defense Services industry here.
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TDG shares were trading at $1,263.00 per share on Monday afternoon, up $2.68 (+0.21%). Year-to-date, TDG has gained 24.85%, versus a 26.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
TransDigm Group (TDG) vs. Cadre Holdings (CDRE): Which Aerospace & Defense Stock Is a Better Investment? StockNews.com
