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TransDigm Group (TDG) Beats Expectations in Q1 2024, Raises Revenue and EBITDA Outlook

By Don Francis, Editor
February 10, 2024 11:31 AM UTC
TransDigm Group (TDG) Beats Expectations in Q1 2024, Raises Revenue and EBITDA Outlook

Truist Securities's Michael Ciarmoli raised their price target on Transdigm Group (NYSE: TDG) by 9.4% from $1,158 to $1,267 on 2024/02/10. The analyst maintained their Strong Buy rating on the stock.

Ciarmoli summarized Transdigm Group's Q1 2024 earnings report, which was released on February 8, 2024. In the report, the company's performance surpassed all expectations, despite a decrease in its EPS guidance due to greater interest expenditure. However, management raised its revenue and EBITDA expectations for the quarter.

For Q1 2024, Transdigm Group reported an EPS of $7.16, beating the Zacks Consensus Estimate of $6.37 and showing a significant increase of 56% compared to Q1 2023's $4.58. The company also reported a revenue of $1.79 billion, exceeding the Zacks Consensus Estimate by 7.07% and showing a 28% increase compared to Q1 2023's $1.4 billion. Net income for the quarter was $382 million, up 67% year-over-year, while EBITDA reached $912 million, representing a 30% increase compared to the previous year. The EBITDA margin for the quarter was 51.0%.

Looking ahead to FY 2024, Transdigm Group's management provided guidance. They expect EPS to be in the range of $29.97 to $31.73, with revenue projected to be between $7.575 billion and $7.755 billion. The company also expects net income to range from $1.56 billion to $1.662 billion, and EBITDA to range from $3.92 billion to $4.05 billion. The EBITDA margin for the fiscal year is anticipated to be around 52.0%.

President & CEO Kevin Stein expressed his satisfaction with the Q1 operating results and the strong start to FY 2024. He highlighted that total revenue exceeded expectations and that commercial aftermarket revenues further expanded. Stein also mentioned that the EBITDA margin for the quarter was 51.0%, up approximately 100 basis points from the same period last year. Excluding the results related to the Calspan acquisition, the Q1 EBITDA margin was approximately 51.8%. Stein emphasized the company's focus on its operating strategy, value drivers, and cost structure management. He expressed optimism about creating value for shareholders throughout the remainder of FY 2024. Stein attributed the increase in net sales and EBITDA guidance to the strong Q1 results and the current expectations for the fiscal year. He also mentioned that the additional interest expense resulting from financing activities completed during the quarter would partially offset the impact on the net income line.

In addition to Ciarmoli, other analysts also updated their ratings on Transdigm Group on February 9, 2024. Susquehanna's Charles Minervino raised their price target by 25.7%, from $875 to $1,100, and maintained their Hold rating on the stock. Goldman Sachs's Noah Poponak raised their price target by 10.4%, from $1,164 to $1,285, and maintained their Strong Buy rating on the stock. RBC Capital's Kenneth Herbert raised their price target by 8.7%, from $1,150 to $1,250, and maintained their Buy rating on the stock.

According to the latest analyst ratings, 66.7% of top-rated analysts currently rate TDG as a Strong Buy or Buy, while 33.3% see it as a Hold. No analysts recommend or strongly recommend selling the stock.

The consensus forecast among analysts is that TDG's upcoming year will deliver earnings per share (EPS) of $23.34. If the analysts' forecast is accurate, TDG's next yearly EPS will be down by 0.9% on a year-over-year basis.

Since TDG's latest quarterly report on February 8, 2024, the stock price has declined by 0.8%. However, on a year-over-year basis, the stock is up 49.9%. During this period, TDG has outperformed the S&P 500, which is up 23.2%.

Truist Securities analyst Michael Ciarmoli is ranked in the top 9% of Wall Street analysts by WallStreetZen. With an average return of 9.7% and a win rate of 64.2%, Ciarmoli specializes in the Industrials, Consumer Cyclical, and Technology sectors.

TransDigm Group Incorporated, based in Cleveland, Ohio, is a manufacturer of aircraft components operating in the U.S. and internationally. The company's Power & Control offerings include mechanical/electro-mechanical actuators and controls, ignition systems, and engine technology. In addition, the Airframe segment provides various engineered products such as latching and locking devices, rods, connectors, sealing solutions, and cockpit security components and systems. TransDigm also offers seat belts and safety restraints for ground transportation applications, as well as electro-mechanical actuators for space applications. Established in 1993, TransDigm Group continues to play a significant role in the aerospace industry.

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