EADSY - TransDigm Group hits record high on aircraft recovery

2023-03-07 10:11:22 ET

TransDigm Group ( NYSE: TDG ) on Tuesday touched a record high of $772.47 a share. The maker of aircraft parts is up about 23% since the beginning of the year, compared with a 5.9% gain for the Standard & Poor’s 500 stock index ( SP500 ).

When reporting Q4 results last month, the company raised its estimates for sales and profit this year. It predicted net sales of $6.07 billion to $6.24 billion, up from $5.99 billion to $6.19 billion previously. The analyst consensus forecast for $6.09 billion.

TransDigm ( TDG ) revised its guidance for adjusted EPS to a range of $21.47 to $22.87 from a prior level of $20.68 to $22.08, compared with the Wall Street average of $21.64.

The company is seeing double-digit growth in its airframe segment including original equipment, whose sales rose 41% from a year earlier to $202 million in Q4. In what’s known as the aftermarket for parts and maintenance, TransDigm’s ( TDG ) sales jumped 44% to $236 million during the comparable periods.

“Most of our EBITDA comes from aftermarket revenues, which generally have significantly higher margins and over any extended period have typically provided relative stability in the downturns,” Kevin Stein, president and CEO of TransDigm ( TDG ) said in a call with investors . “We own and operate proprietary aerospace businesses with significant aftermarket content.”

The company is cautiously optimistic about the recovery in international travel after China lifted pandemic-related restrictions.

“International air traffic is closing in on the domestic travel recovery and China reopened its air travel in January with the lifting of its pandemic restrictions,” Stein said. “However, there is still progress to be made for the industry as our results to continue to be adversely affected in comparison to pre-pandemic levels since the demand for air travel is still depressed.”

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