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.
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