Transdigm Group (TDG) AI Stock Analysis

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Transdigm Group

(NYSE:TDG)

75Outperform

TransDigm Group shows robust operational performance supported by strong profitability and cash flow management, despite a highly leveraged balance sheet. The stock demonstrates positive technical momentum, though valuation concerns arise from a high P/E ratio. Despite some challenges, the positive earnings call outlook and strategic focus provide a solid foundation for future growth, resulting in a favorable overall score.

Positive Factors

Capital Deployment

TransDigm has been actively repurchasing shares, demonstrating a focus on capital deployment.

Commercial Aftermarket Growth

Commercial aftermarket growth accelerated to 13% from 9% last quarter.

Operational Performance

EBITDA margins surpassed expectations, indicating strong operational performance.

Negative Factors

Margin Compression

The reiterated guidance implies a second-half margin compression, which may have pressured shares.

Market Reaction

Weaker OE and a reiteration of the margin guide implying more than 100 bps of contraction drove a negative share reaction.

Revenue Performance

Second-quarter revenue was slightly below consensus on 7% organic growth.

Transdigm Group (TDG) vs. S&P 500 (SPY)

Market Cap

$79.94B

Dividend YieldN/A

Average Volume (3M)347.08K

Price to Earnings (P/E)48.1

Beta (1Y)0.97

Revenue Growth14.90%

EPS Growth17.50%

CountryUS

Employees16,600

SectorIndustrials

Sector Strength91

IndustryAerospace & Defense

Share Statistics

EPS (TTM)9.11

Shares Outstanding56,167,084

10 Day Avg. Volume366,626

30 Day Avg. Volume347,082

Financial Highlights & Ratios

PEG Ratio3.82

Price to Book (P/B)-12.80

Price to Sales (P/S)0.00

P/FCF Ratio38.77

Enterprise Value/Market Cap1.25

Enterprise Value/Revenue3.22

Enterprise Value/Gross Profit20.82

Enterprise Value/Ebitda6.50

Forecast

1Y Price Target

$1,522.57

Price Target Upside5.73% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering15

Transdigm Group Business Overview & Revenue Model

Company DescriptionTransDigm Group Incorporated designs, produces, and supplies aircraft components in the United States and internationally. Its Power & Control segment offers mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, databus and power controls, sensor products, switches and relay panels, hoists, winches and lifting devices, and cargo loading and handling systems. This segment serves engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies, and repair depots. The company's Airframe segment provides engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, cockpit security components and systems, cockpit displays, engineered audio, radio and antenna systems, lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, thermal protection and insulation products, lighting and control technology, and parachutes. This segment serves airframe manufacturers, cabin system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies, and repair depots. Its Non-aviation segment offers seat belts and safety restraints for ground transportation applications; electro-mechanical actuators for space applications; hydraulic/electromechanical actuators and fuel valves for land-based gas turbines; refueling systems for heavy equipment used in mining, construction, and other industries; and turbine controls for the energy and oil and gas markets. This segment serves off-road vehicle and subsystem suppliers, child restraint system suppliers, and satellite and space system suppliers; and manufacturers of heavy equipment. TransDigm Group Incorporated was founded in 1993 and is based in Cleveland, Ohio.

How the Company Makes MoneyTransdigm Group generates revenue through the sale of its proprietary aerospace components and systems to a wide range of customers, including aircraft manufacturers, airlines, and the military. The company focuses on products that have a high degree of aftermarket demand, which allows it to benefit from ongoing maintenance and replacement needs over the lifespan of an aircraft. Key revenue streams include original equipment manufacturing (OEM) sales, aftermarket sales, and military sales. A significant portion of its revenue is derived from aftermarket sales, which are highly profitable due to the proprietary nature of the parts and the critical role they play in aircraft operations. Additionally, Transdigm often engages in strategic acquisitions to enhance its product offerings and market reach, further bolstering its revenue potential.

Transdigm Group Key Performance Indicators (KPIs)

Any

EBITDA by Segment

EBITDA by Segment
Shows profitability across different business segments, highlighting which areas are driving earnings and where there might be opportunities or challenges in cost management.

Chart InsightsTransDigm's EBITDA growth is robust across segments, notably in Power and Control, which has seen a significant rise since 2020. This aligns with strong Q2 results and strategic capital allocation. However, the earnings call highlights challenges in the commercial OEM segment due to supply chain issues and Boeing's production rates. Despite these headwinds, the company maintains a positive outlook, driven by strong aftermarket and defense growth. The conservative full-year guidance reflects caution amid macroeconomic uncertainties, but the focus on operational efficiency and M&A opportunities suggests resilience.

Data provided by:

Main Street Data

Transdigm Group Financial Statement Overview

Summary

TransDigm Group shows strong profitability and cash flow generation, which are crucial for navigating its high leverage in the aerospace and defense industry. Despite the negative equity, the operational efficiency and revenue growth position the company well for future challenges.

Income Statement

Very Positive

The company demonstrates a strong revenue growth rate of 2.71% TTM, with robust gross and net profit margins of 58.74% and 22.38% respectively. EBIT and EBITDA margins are also impressive at 45.98% and 50.31%, indicating efficient operations and profitability.

Balance Sheet

Negative

The balance sheet reveals significant leverage, with a negative stockholders' equity resulting in a high debt-to-equity ratio, which presents financial risk. However, the company's ability to generate profits could help manage this leverage.

Cash Flow

Positive

The company exhibits strong cash flow management, with a 5.85% growth in free cash flow. The operating cash flow to net income ratio of 1.18 suggests healthy cash conversion from earnings, supporting liquidity.

TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
8.15B	7.94B	6.58B	5.43B	4.80B	5.10B
	Gross Profit
4.79B	4.67B	3.84B	3.10B	2.51B	2.65B
	EBIT
3.75B	3.53B	2.92B	2.21B	1.69B	1.75B
	EBITDA
4.10B	3.87B	3.21B	2.46B	2.06B	2.05B
	Net Income Common Stockholders
1.82B	1.71B	1.30B	866.00M	680.00M	699.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
2.46B	6.26B	3.58B	3.00B	4.79B	4.72B
	Total Assets
21.52B	25.59B	19.97B	18.11B	19.32B	18.39B
	Total Debt
25.05B	24.90B	19.60B	19.81B	20.02B	20.01B
	Net Debt
22.59B	18.64B	16.13B	16.81B	15.23B	15.29B
	Total Liabilities
27.77B	31.87B	21.95B	21.87B	22.23B	22.36B
	Stockholders Equity
-6.26B	-6.29B	-1.98B	-3.77B	-2.92B	-3.97B
Cash Flow		Free Cash Flow
1.99B	1.88B	1.24B	829.00M	808.00M	1.11B
	Operating Cash Flow
2.16B	2.04B	1.38B	948.00M	913.00M	1.21B
	Investing Cash Flow
-2.42B	-2.44B	-900.00M	-553.00M	-785.00M	799.00M
	Financing Cash Flow
-1.41B	3.17B	-16.00M	-2.15B	-70.00M	1.23B

Transdigm Group Technical Analysis

Technical Analysis Sentiment

Positive

Last Price1440.00

Price Trends

50DMA

1364.86

Positive

100DMA

1342.24

Positive

200DMA

1315.91

Positive

Market Momentum

MACD

17.63

Negative

RSI

59.50

Neutral

STOCH

66.90

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TDG, the sentiment is Positive. The current price of 1440 is above the 20-day moving average (MA) of 1400.30, above the 50-day MA of 1364.86, and above the 200-day MA of 1315.91, indicating a bullish trend. The MACD of 17.63 indicates Negative momentum. The RSI at 59.50 is Neutral, neither overbought nor oversold. The STOCH value of 66.90 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TDG.

Transdigm Group Risk Analysis

Transdigm Group disclosed 30 risk factors in its most recent earnings report. Transdigm Group reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Transdigm Group Peers Comparison

Overall Rating

UnderperformOutperform

Sector (64)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
HEI	82 Outperform	$33.84B	68.96	16.18%	0.08%	23.06%	32.43%
GD	78 Outperform	$75.34B	19.48	18.23%	2.05%	14.11%	17.65%
LMT	77 Outperform	$109.73B	20.23	82.55%	2.75%	3.12%	-15.29%
LHX	76 Outperform	$43.03B	27.28	8.49%	2.03%	5.39%	36.86%
TDG	75 Outperform	$79.94B	48.06	-29.16%	―	14.90%	17.50%
NOC	70 Outperform	$68.10B	18.62	25.41%	1.74%	0.61%	77.28%
Sector *	64 Neutral	$4.43B	12.01	5.16%	249.23%	4.03%	-11.73%

* Industrials Sector Average

Performance Comparison

TDG

Transdigm Group

1,423.17

179.79

14.46%

General Dynamics

280.71

-13.39

-4.55%

LHX

L3Harris Technologies

230.20

11.08

5.06%

HEI

HEICO

281.13

66.34

30.89%

LMT

Lockheed Martin

468.32

13.18

2.90%

NOC

Northrop Grumman

471.12

10.11

2.19%

Transdigm Group Earnings Call Summary

Earnings Call Date:May 06, 2025

(Q2-2025)

% Change Since: -2.22%|

Next Earnings Date:Aug 12, 2025

Earnings Call Sentiment Neutral

TransDigm delivered strong financial results for Q2 with significant growth in commercial aftermarket and defense revenues, supported by effective capital allocation and operational efficiency. However, challenges in the commercial OEM segment, pressures from tariffs, and a conservative outlook reflect caution due to macroeconomic uncertainties.

Q2-2025 Updates

Positive Updates

Strong Q2 Financial Performance

TransDigm reported a 7% organic growth rate, with notable increases in commercial aftermarket (13%) and defense market revenues (9%). EBITDA as defined margin was 54% for the quarter, and the company ended with a cash balance of over $2.4 billion.

Operational Efficiency and Strategic Capital Allocation

The company maintained a disciplined approach to capital allocation, repurchasing approximately 140,000 shares post-Q2 at favorable prices. TransDigm also kept its debt maturity well-managed, with 75% of its $25 billion gross debt hedged through 2027.

Positive Market Outlook

Commercial aerospace market trends remain favorable, with a strong aftermarket growth outlook of high single-digit to low double-digit range. IATA expects traffic to reach 113% of 2019 levels in 2025.

Negative Updates

Flat Commercial OEM Revenue

Despite sequential improvement, commercial OEM revenue was flat compared to the prior year, impacted by OEM supply chain and labor challenges as well as Boeing's production rates still being below pre-pandemic levels.

Pressure from Tariffs and Economic Environment

The company is navigating through evolving tariffs and a potentially weakening economic environment, although it anticipates limited impact on margins due to its domestic manufacturing base.

Conservative Full-Year Guidance

Despite strong Q2 results, TransDigm maintained its fiscal 2025 guidance, citing a dynamic macroeconomic environment and potential risks like economic recession and OEM production rate impacts.

Company Guidance

During the Q2 2025 earnings call, TransDigm Group Incorporated provided financial guidance for fiscal 2025. The company maintained its full-year revenue guidance with a midpoint of $8.85 billion, representing an approximate 11% increase. The EBITDA as defined guidance was set at $4.685 billion, up about 12%, with an expected margin of 52.9%. Adjusted EPS is projected at $36.47, marking a 7% rise. The company expects commercial OEM revenue growth in the low to mid-single-digit percentage range, defense market revenue growth in the high single-digit to low double-digit percentage range, and commercial aftermarket growth in the high single-digit to low double-digit percentage range. TransDigm ended the quarter with a strong cash balance of $2.4 billion and plans to continue opportunistic share repurchases and pursue M&A opportunities while maintaining a disciplined capital allocation strategy.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.