A month has gone by since the last earnings report for TransDigm Group (TDG). Shares have lost about 1.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is TransDigm due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
TransDigm Q4 Earnings Beat Estimates, Revenues Up Y/Y
TransDigm Group reported fourth-quarter fiscal 2019 adjusted earnings of $5.62 per share, which surpassed the Zacks Consensus Estimate of $4.85 by 15.9%. Moreover, the bottom line increased 26.6% from $4.44 per share a year ago.
Barring one-time items, the company reported GAAP earnings of $4.08 per share compared with $4.14 in the year-ago quarter.
Net sales amounted to $1,541.3 million, reflecting a surge of 46.9% from $1,049.4 million in the prior-year quarter. However, the reported figure missed the Zacks Consensus Estimate of $1,663 million by 7.3%.
Organic sales grew 8% year over year. Acquisition sales contributed $407.6 million, primarily coming from Esterline Technologies Corporation.
TransDigm ended the fourth quarter of fiscal 2019 with cash and cash equivalents of $1,467.5 million, down from $2,073 million as of Sep 30, 2018. At the end of the reported quarter, the company’s long-term debt summed $16.47 billion, up from $12.5 billion as of Sep 30, 2018.
Cash from operating activities amounted to $1,015.5 million as of Sep 30, 2019, compared with $1,022.2 million as of Sep 30, 2018.
Fiscal 2020 Outlook
TransDigm issued its fiscal 2020 financial guidance. Net sales are now anticipated to be $6,175-$6,325 million. The Zacks Consensus Estimate for the same is pegged at $6,300 million, which lies above the mid-point of the company’s guided range.
EBITDA is anticipated to be $2,775-$2,875 million. Adjusted earnings per share are now expected to be $19.8-$21.2.
Net income from continuing operations is anticipated to be $1,000-$1,080 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
Currently, TransDigm has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, TransDigm has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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