TransDigm Group Beats – Analyst Blog

TransDigm Group Inc (TDG) reported earnings from continuing operations of 67 cents per share, exceeding the Zacks Consensus Estimate of 34 cents.

 

Net sales for the quarter rose 1.7% to $184.3 million from $181.3 million in the comparable quarter a year ago. The favorable contribution from acquisitions of 9.0% more than offset the 7.3% decline in organic net sales. The decrease in organic sales was primarily due to lower commercial OEM and aftermarket demand, partially offset by higher defense sales.

 

Organically, higher defense and commercial transport OEM sales offset lower commercial aftermarket and OEM business jet revenues. The company has witnessed indications of commercial aftermarket improvement in the latter part of the recently concluded quarter.

 

Net income for the quarter decreased 22.3% to $30.8 million, compared with $39.6 million in the comparable quarter a year ago. The decrease in net income was primarily due to an increase in interest expense of $5.9 million, net of tax, associated with the $425 million note offering issued on October 6, 2009, an incremental increase in acquisition-related expenses of $1.8 million, net of tax, and transaction-related costs relating to the adoption of new accounting rules for business combinations of $0.9 million, net of tax.

 

During the quarter, the company successfully completed an offering of $425 million of 7¾% senior subordinated notes due in 2014 and paid a special dividend of $7.65 per share. Additionally, during the quarter, the company acquired the assets of proprietary aerospace valve manufacturers Dukes Inc., and GST Industries Inc. on December 2, 2009.

 

At the end of the quarter, cash and equivalents stood at $162 million with long-term debt at $1.7 billion.

 

The company also raised its full year fiscal 2010 guidance, which assumes no additional acquisitions, as follows: Revenues are anticipated in the range of $800 to $831 million (previously in the range of $770 to $800 million) compared with $762 million in fiscal 2009; net income is anticipated in the range of $143 to $153 million (previously in the range of $116 to $126 million) compared with $163 million in fiscal 2009.

 

Adjusted earnings per share under the treasury stock method are expected to be in the range of $3.05 to $3.25 per share on weighted average shares outstanding of 51.0 million (previously in the range of $2.90 to $3.10 per share) compared with $3.42 in fiscal 2009.

 

Through its wholly owned subsidiaries, TransDigm Group is a leading global designer, producer and supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft in service today. Major competitor is Honeywell International (HON).

 

We currently have a Neutral recommendation on TDG.