TransDigm Group: Earnings Preview

| About: TransDigm Group (TDG)

TransDigm Group Inc. (NYSE:TDG) is slated to release its second-quarter fiscal 2012 earnings result on Tuesday, May 8, 2012. The current Zacks Consensus Estimate for second-quarter earnings per share (EPS) is $1.30, representing annualized growth of 38.71%. (Analyst report here.)

TransDigm's earnings were above the Zacks Consensus Estimate in the last four quarters, with an average positive earnings surprise of 16.39% for the trailing four quarters.

First Quarter Fiscal 2012 Highlights

The company's first-quarter fiscal 2012 earnings per share from continuing operations of $1.15 outpaced the Zacks Consensus Estimate of $1.11 and prior-year loss per share of $1.19. Earnings in the reported quarter were aided by increased sales, solid proprietary products of the company, good productivity and favorable tax adjustments, partially offset by increased interest expense.

Net sales were $352.5 million, up 50.9% year over year. Organically, sales during the quarter rose by approximately 18.4%, driven by increased sales in the commercial aftermarket and OEM markets and a slight improvement in defense sales. Sales during the quarter were also aided by acquisitions of McKechnie Aerospace, Schneller, Harco and Talley Actuation.

Agreement of Estimate Revisions

None of the analysts have increased or decreased their estimates in the last 7 days. Moreover, there was no decrease in the last 30 days. However, for second-quarter 2012, third-quarter 2012 and full-year 2012, one analyst each has increased their estimates in the last 30 days.

Magnitude of Estimate Revisions

In the last 7 days, there was no change in earnings estimate for the second-quarter 2012, third-quarter 2012, full-year fiscal 2012 or fiscal 2013. However, in the last 30 days, earnings estimates for the third quarter were increased from $1.47 to $1.48 and for fiscal 2012 increased from $5.51 to $5.54.

Our Take

The company is deriving significant benefits from its Harco acquisition, the main reason behind why it had increased its guidance for 2012. TransDigm expects total revenue for fiscal 2012 to be in the range of $1,470 million to $1,510 million, and earnings per share is expected in the range of $5.15 to $5.49.

However, an uncertain aerospace market and worldwide economic environment remain a matter of concern.

Based in Cleveland, Ohio, TransDigm Group Inc. designs, produces and supplies engineered aircraft components for use on commercial and military aircraft. The company operates principally in the U.S. Major competitors of the company are Goodrich Corp. (NYSE:GR) (analyst report here), Honeywell International Inc. (NYSE:HON) (analyst report here) and United Technologies Corp. (NYSE:UTX).

We continue to maintain an Outperform rating on TransDigm for the long-term. The company has a Zacks #1 Rank (Strong Buy recommendation) over the next one-to-three months.