Earnings Per Share Revenue
$3.08 GAAP | $3.30 Adjusted $907.67M

 

TransDigm Group’s Q3 2017 Results

Beating an EPS forecast of 2.98, TransDigm [NYSE:TDG] produced a strong quarter. Revenue was up about 13.79% from Q3 2016. This was due to strong growth in the commercial passenger and freight transport aftermarket segments, along with further growth in their defense holdings. These results are partially offset by their business jet/helicopter segments and their discretionary interiors market.

3Q 2017 3Q 2016
Power & Control Net Sales $504.27M $402.14M
Airframe Net Sales $372.88M $370.41M
Non-Aviation Net Sales $30.51M $25.14M

 

Acquisition Results

Approximately $100M was spent this quarter on three additional Aerospace-related product lines. These businesses bring in a combined revenue of about $32M, and are being integrated into the larger system.

Tactair was acquired in September of 2016. This company manufactures electromechanical, hydraulic and pneumatic motion and fluid controls for the aerospace and industrial gas turbine industries. Their EBITDA margins since acquisition are up as a result of an effort to reduce headcount, product cost and non-production spending.

Data Device Corporation (DDC) was acquired in June of 2016. According to the earnings call, “DDC is the world leader in the design, manufacture of high-reliability databus, motion control and solid-state power controller products for aerospace and defense vehicles. This capability allows them to deliver the smallest, lightest and highest-performing products in the most cost-effective packaging for these applications in the aerospace market.” TDG has implemented a headcount reduction and conducted a review of pricing, contractual opportunities and new product initiatives to drive value generation.

Breeze-Eastern was acquired in January of 2016. This company produces helicopter hoists/winches and other cargo hook systems. Streamlined price lists and cost structure have resulted in management-satisfying cost reduction and exceed their expectations as margins have expanded.

 

Stock Repurchasing and Special Dividends

TransDigm spent $50 million this quarter to repurchase approximately 206,000 shares. The stock repurchasing plan has been extended from a maximum expenditure of $472M to $600M, as of March 7. Due to previous share buybacks since the program began in January 2016, there is still $360.2M remaining for this program. An aggregate payment of $1,376M for a $24.00 per share special dividend and dividend equivalent payments have been made since the start of the year.

Also mentioned in the call, “…We expect to give back to our shareholders in fiscal year ’17 almost $3 billion, or between $50 and $55 a share, through a mix of special dividends and buybacks. This is almost 20% of the market cap at the start of fiscal year 2017.” As a result, expect this trend of giving back to shareholders to continue in a powerful way.

 

My Verdict

Assets have decreased rather significantly in the last year, moving from $1,587M to $970.5M. Liabilities have increased from $11,377.8M to $12,211.9M due in large part to long term debt increasing from $9,943.2M to $10,828.2M. Cash on hand has decreased significantly as well, though management points toward the acquisitions and share repurchasing/dividend programs as being the major culprit.

Despite these risks, I find myself enthralled with TDG. I believe a decent entry point has been made for those interested because of the post-earnings drop. With a strong ER overall, I believe this company has a decent upside for their investors. From the huge buyback program to the special dividends, TransDigm has presented a healthy interest in satisfying their shareholders.


Disclaimer

As of this moment, I do not own shares of TransDigm Group. My opinions are entirely my own and may or may not reflect the opinions of my peers on TickHounds. I am not being compensated for sharing my due diligence in any way other than what tips may be accrued.

Most information for this post was retrieved from TDG’s 3Q 10-Q SEC Form.