TransDigm Group Downgraded to Strong Sell

Zacks

Zacks Investment Research downgraded TransDigm Group Incorporated (TDG) to a Zacks Rank #5 (Strong Sell) on Jul 5.

Why the Downgrade?

TransDigm’s financials have been affected by the debt burden and increasing interest expense. Shares of this aircraft components manufacturer have been on a downtrend since Jun 4 following the company’s announcement of the procurement of yet another loan of $825 million. TransDigm’s shares have declined over 12% since then. Also, weak financials have triggered downward estimate revisions for the company over the last 30 days.

Along with the aforementioned loan, the company also announced a special cash dividend of $25.00 per share. TransDigm’s funding its dividends by taking loans is proving to be a drag on its financials. Prior to this, in 2013, the company had borrowed about $1.8 billion to payout special dividends.

At the end of the last reported quarter (second-quarter 2014), the company reported cash and cash equivalents of $475.7 million, a decline of 15.7% from $564.7 million as on Sep 30, 2013.  TransDigm’s long-term debt stood at $5.7 billion, compared with the debt of $4.3 billion in the prior-year quarter. Its interest expenses also increased about 22% year over year to $82 million.

The Zacks Consensus Estimate for fiscal 2014 decreased 0.2% to $6.53 per share over the last 30 days. Whereas for fiscal 2015, the Zacks Consensus Estimate slumped by more than 3% to $8.01 per share as 2 of the 4 estimates were revised downward over the last 30 days.

Other Stocks to Consider

Other better-ranked stocks that look promising at the moment include Hexcel Corp. (HXL), CAE Inc. (CAE) and Curtiss-Wright Corp. (CW). All three stocks carry a Zacks Rank #2 (Buy).

Read the Full Research Report on TDG
Read the Full Research Report on HXL
Read the Full Research Report on CW
Read the Full Research Report on CAE


Zacks Investment Research

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