Reasons to Add TransDigm Group (TDG) to Your Portfolio Now
TransDigm Group TDG is a producer, supplier and designer of highly engineered aerospace components, systems and subsystems for use in commercial and military aircraft. Its rising earnings estimates and strong liquidity offer a great investment opportunity in the aerospace defense sector.
Let’s focus on the reasons that make this Zacks Rank #2 (Buy) stock an investment opportunity at the moment.
Growth Projections, Earnings Growth & Surprise History
The Zacks Consensus Estimate for TDG’s fiscal 2024 earnings per share (EPS) has increased 5.02% to $32.39 in the past 60 days. The Zacks Consensus Estimate for TDG’s total revenues for fiscal 2024 stands at $7.59 billion, indicating year-over-year growth of 15.23%.
The company’s (three to five years) earnings growth is pegged at 16.27%. It delivered an average earnings surprise of 9.20% in the last four quarters.
Recovery in Commercial Air Traffic
Due to the gradual recovery in air traffic trends over the past year, the commercial aerospace industry is once again booming, which has been benefiting TransDigm. The company’s commercial aftermarket revenues witnessed a solid 27% year-over-year improvement in the fiscal fourth quarter. Commercial aftermarket bookings for the company were also strong in the reported quarter, which should fetch solid revenues in the coming quarters for TransDigm.
Rising Defense Budget
The fiscal 2024 (FY24) budget proposal includes $842 billion as funding for the Pentagon, indicating a 3.2% increase from fiscal 2023’s enacted amount. This enhanced budget proposal has thus boosted the possibility for renowned military jet builders like Boeing and others to acquire significant defense contracts from the Pentagon, which should benefit equipment suppliers like TransDigm.
TransDigm's products hold a significant position in the U.S. defense aerospace market. The company has been enjoying significant growth opportunities in the defense space on account of the expansionary budgetary policy adopted by the U.S. administration and other developing nations in the past couple of years.
Solvency & Liquidity Ratio
TransDigm Group’s times interest earned ratio (TIE) at the end of fiscal 2023 was 2.5. The strong TIE ratio indicates that the company will be able to meet its interest payment obligations in the near term without any problems.
The current ratio at the end of fiscal 2023 was 4.27. The ratio being greater than one indicates the company’s ability to meet its future short-term liabilities without difficulties.
Price Performance
In the past six months, TDG shares have risen 14.3% compared with its industry’s average return of 2%.
Image Source: Zacks Investment Research
Other Stocks to Consider
A few other top-ranked stocks related to the same industry are VirTra VTSI, which sports a Zacks Rank #1 (Strong Buy), and Leidos LDOS and Safran SAFRY, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
VirTra’s long-term earnings growth rate is pegged at 30%. The Zacks Consensus Estimate for the company’s 2023 EPS is pegged at 64 cents, implying a year-over-year increase of 255.56%.
Leidos’ long-term earnings growth rate is pegged at 8.12%. The Zacks Consensus Estimate for the company’s 2023 EPS stands at $7.02, calling for a year-over-year increase of 6.36%
Safran’s long-term earnings growth rate is pegged at 34.34%. The Zacks Consensus Estimate for the company’s 2023 EPS is pegged at $1.42, indicating a year-over-year rise of 100%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Transdigm Group Incorporated (TDG) : Free Stock Analysis Report
Safran SA (SAFRY) : Free Stock Analysis Report
Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
VirTra, Inc. (VTSI) : Free Stock Analysis Report
