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TransDigm Group (TDG) to Report Q2 Earnings: What's in Store?

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Transdigm Group Incorporated TDG is expected to report its second-quarter fiscal 2021 results soon.

In the last reported quarter, the company delivered a negative earnings surprise of 5.74%. However, it surpassed the Zacks Consensus Estimate in three out of the trailing four quarters, delivering an earnings surprise of 33.77%, on average.

Let’s see how things have shaped up prior to this announcement.

Factors to Consider

Since the fourth quarter of 2020, TransDigm Group has been seeing some upside in its commercial aftermarket revenues, which is typically the largest and most profitable portion of business. However, the pace of recovery in global air traffic over the past couple of quarters have been quite slow and definitely not anywhere near the pre-pandemic level. Therefore, lower commercial aftermarket revenues are expected to have hurt the company’s overall top-line performance in the first quarter of 2021.

Transdigm Group Incorporated Price and EPS Surprise

Transdigm Group Incorporated Price and EPS Surprise
Transdigm Group Incorporated Price and EPS Surprise

Transdigm Group Incorporated price-eps-surprise | Transdigm Group Incorporated Quote

On the other hand, as the pandemic is still ongoing, its impact on commercial aerospace is projected to have hurt TransDigm Group’s commercial Original Equipment Manufacturer (OEM) sales once again in the first quarter. On a brighter note, the company’s defense business is expected to have been strong, continuing the solid order growth that it has witnessed in the past quarters. This might have contributed favorably to its quarterly revenues.

Notably, the Zacks Consensus Estimate for fiscal second-quarter revenues is pegged at $1.18 billion, indicating a deterioration of 18.1% from second-quarter fiscal 2020.

Such dismal sales projections make us skeptical about the company’s fiscal second-quarter earnings. Moreover, the impact of low commercial aftermarket revenues has been hurting TransDigm Group’s operating margin, a trend we expect to have prevailed in the fiscal second quarter as well, thereby pulling down its bottom line.

The Zacks Consensus Estimate for earnings stands at $2.52 per share, implying a plunge of 50.6% from the year-ago quarter’s reported figure.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for TransDigm Group this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But this is not the case here.

Earnings ESP: The company’s Earnings ESP is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: TransDigm Group carries a Zacks Rank #3, currently.

A Stock to Consider

Here is a defense company you may want to consider as it has the right combination of elements to post an earnings beat in its upcoming releases:

Triumph Group TGI has an Earnings ESP of +9.80% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Defense Releases

Lockheed Martin LMT reported first-quarter 2021 earnings of $6.56 per share, which surpassed the Zacks Consensus Estimate of $6.32 by 3.8%.

Textron Inc. TXT reported first-quarter 2021 adjusted earnings of 70 cents per share, which exceeded the Zacks Consensus Estimate of 47 cents by 48.9%.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

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Transdigm Group Incorporated (TDG) : Free Stock Analysis Report

Lockheed Martin Corporation (LMT) : Free Stock Analysis Report

Textron Inc. (TXT) : Free Stock Analysis Report

Triumph Group, Inc. (TGI) : Free Stock Analysis Report

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