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After TransDigm reported its November results, we updated our fair value. We raised our projections for sales and profit per share after total revenue reached 10.5 billion dollars for the year. We added the shift in how the company returns cash to shareholders to what we track, specifically the record 2.8 billion dollars spent on share buybacks. We have also updated our expectations for margins to account for the impact of the 4.4 billion dollars spent on acquisitions.
TransDigm reported adjusted earnings of $12.44 per share, topping the $12.21 analysts expected. Total sales reached nearly $3 billion for the quarter. About 14 percent of that growth was organic, meaning it came from the company's existing businesses rather than new acquisitions.
This performance shows the strength of the company's business model, which relies on owning the rights to critical parts that planes need to keep flying. Because many of these parts are proprietary, TransDigm has significant power to set prices. As long as global air travel remains active, the constant wear and tear on aircraft fleets creates a steady stream of high-profit sales for the company.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
TransDigm is scheduled to report its latest financial results before the market opens on Tuesday. Analysts are looking for profit of about $12.21 per share on revenue of roughly $2.95 billion. The company has a consistent track record of performing better than Wall Street expects, having topped analyst targets in seven of the last eight quarters. This report will be particularly important as it marks the end of the company's fiscal year. Beyond the basic numbers, the focus will likely be on the health of the aerospace aftermarket, the business of selling replacement parts for planes already in service. Because TransDigm owns the rights to many critical parts that must be replaced regularly, its ability to maintain high profit margins in this segment is the core of why the business is so valuable.
TransDigm is scheduled to report its quarterly results on November 11. Analysts are looking for profit of about $12.21 per share on revenue of roughly $2.95 billion. The main thing to watch is the health of the aftermarket, which is the business of selling replacement parts for older planes. TransDigm makes most of its profit here because it owns the rights to specific parts that airlines must buy to keep their fleets flying. Any update on how much airlines are flying and how often they are replacing these parts will be the key to the report.
The World Bank warned that global commodity prices are on track to jump 23 percent next year, driven by energy costs and shipping disruptions from conflict in the Middle East. For a manufacturer like TransDigm, this means the raw materials and energy used to make aircraft parts will likely cost more.
While the company has a strong history of raising prices on its specialized parts, a sharp and sudden rise in what it pays for materials can squeeze profits in the short term. This is worth watching to see if the company can maintain its high profit margins if these higher costs stick around.
Source: Reuters
Management consistently sets a bar they can clear, beating expectations in seven of the last eight quarters as the business outruns even the most bullish forecasts.
| Expectation | |
|---|---|
| EPS | $9.75 |
| Revenue | $2.69B |
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