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Is TransDigm Group (TDG) Worth Adding to Your Portfolio?

Zacks Equity Research
Updated

On Jun 24, Zacks Investment Research upgraded TransDigm Group Incorporated TDG to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

TransDigm Group has been witnessing rising earnings estimates on the back of strong second-quarter fiscal 2016 results. This Aerospace and defense equipment supplier reported a positive earnings surprise of 12.4% in the second quarter of fiscal 2016. The long-term earnings growth is pegged at 14.26%.

Recently, the company completed the acquisition of ILC Holdings, Inc., the parent company of Data Device Corporation ("DDC"), from Behrman Capital, for a total purchase price of $1.0 billion in cash. This acquisition will boost its revenues in the second half of fiscal 2016. In addition, the company acquired PneuDraulics in Aug 2015 and Breeze-Eastern in Jan 2016, both of which are expected to boost its top line.

TransDigm Group is also working toward realigning its business to make it more customer friendly, and to enhance operational performance and responsiveness. These changes are expected to be complete by the second half of fiscal 2016 and will drive the performance of the company.

Backed by its diverse product offerings, the company has been able to secure a contract from The Boeing Company BA for an upgraded sealed audio control panel used on the 737 Next Generation. TransDigm Group’s unit, PneuDraulics has also received a contract to supply four hydraulic systems to Textron Inc.’s TXT unit, Textron Aviation. Further, the company received a contract from the Airbus Group SE EADSY related to a new program for the A320neo.

TRANSDIGM GROUP Price and Consensus

TRANSDIGM GROUP Price and Consensus | TRANSDIGM GROUP Quote

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New contracts, business realignment strategies and prudent acquisitions will help the company to achieve its earnings per share guidance of $11.04 to $11.28 per share in fiscal 2016, much higher than the fiscal 2015 level of $9.01.

The Zacks Consensus Estimate for 2016 moved up 5.2% to $10.69 per share as 100% of the estimates were revised higher over the last 60 days. For 2017, 100% estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 12.7% to $12.31 per share.

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BOEING CO (BA): Free Stock Analysis Report
 
TRANSDIGM GROUP (TDG): Free Stock Analysis Report
 
TEXTRON INC (TXT): Free Stock Analysis Report
 
AIRBUS GROUP NV (EADSY): Free Stock Analysis Report
 
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Zacks Investment Research