TransDigm Q4 Adj Earnings Outpace Ests

Zacks

Leading global designer, producer and supplier of highly engineered aircraft components,TransDigm Group Incorporated (TDG) reported fourth-quarter fiscal 2013 adjusted earnings per share of $1.75, which stormed past the Zacks Consensus Estimate of loss of 18 cents.

Adjusted earnings also improved 1.7% from $1.72 earned in the prior-year quarter. Adjusted net income for the reported quarter rose 7.3% to $99.7 million. The increase in adjusted earnings was partially offset by higher share count in the quarter.

However, GAAP net income dropped 4.4% year on year to $84.0 million. GAAP net loss was reported at 20 cents per share, down from $1.63 per share in the prior-year quarter. This decline was mainly due to a $95.1 million dividend paid in the quarter and higher interest expense in the quarter. The company’s earnings were negatively impacted by significant expenses that include acquisition related costs, certain one-time costs, increased outstanding borrowings and non-cash compensation costs.

The company reported fiscal 2013 adjusted net income of $380.1 million, or $6.90 per share, up from $359.7 million, or $6.67 per share, in the comparable period a year ago.

Revenues

Net sales in the quarter totaled $539.7 million, representing a year-over-year increase of 16.7%. Organic net sales growth was up 5.6% from the prior-year period, driven by increase in volumes from commercial original equipment manufacturer (:OEM) and defense.

Growth in acquisitions for the quarter has also increased driven by positive synergies from the acquisitions of Arkwin, AmSafe, Aerosonic and Whippany. Revenues also beat the Zacks Consensus Estimate of $538 million.

The company’s fiscal 2013 revenues increased 13.2% to $1,924.4 million from $1,700.2 million in last fiscal. Organic revenues grew 3.5% in the fiscal.

Margins

TransDigm reported Earnings Before Interest, Taxes, Depreciation and Amortization (:EBITDA) for the quarter at $229.5 million which increased 9.8% from $209.0 million in the prior-year quarter.

The company’s EBITDA in the reported fiscal was up 3.2 % to $792.7 million versus $768.0 million in the previous fiscal. Adjusted EBITDA margin was also strong at 46.8%.

Balance Sheet and Cash Flow

Exiting fiscal 2013, TransDigm’s cash and cash equivalents increased to $564.7 million from $440.5 million in the preceding year. The company’s long-term debtincreased 58.4% to $5.7 billion at the end of fiscal 2013, while the shareholder’s deficit came at $336.4 million.

During the quarter, TransDigm offered $500 million of 7.50% senior subordinated notes along with the addition of a new loan that aided the company’s special dividend payment of $22.00 per share in July.

Cash from operating activities in the year was $470.2 million compared with $413.9 million in fiscal 2012.

Revised Outlook

TransDigm expects to reap positive synergies from its three recent acquisitions and has provided a positive outlook for fiscal 2014. The company now expects net sales to be in the range of $2.1–$2.2 billion in fiscal 2014 compared to revenues of $1,9 billion in fiscal 2013.

TransDigm expects fiscal 2014 net income to be in the range of $372–$390 million.

Additionally, EPS is expected to be in the range of $6.16 to $6.48 per share after accounting for the increase in the number of outstanding shares in the quarter. Adjusted earnings per share are expected to be in the range of $7.00 to $7.32, as compared with fiscal 2013 earning’s of $6.90 per share.

TransDigm currently carries a Zacks Rank #1 (Strong Buy). Some other stocks in the sector that are worth a look include Alliant Techsystems (ATK), Hexcel Corp. (HXL) and Teledyne Technologies Inc. (TDY). While Alliant carries a Zacks Rank #1 (Strong Buy), Hexcel Corp. and Teledyne Technologies has a Zacks Rank #2 (Buy).

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