TransDigm Group Hits 52-Week High - Analyst Blog

Shares of TransDigm Group Inc. TDG hit a 52-week high of $154.79 during Monday's trading session. However, the stock closed the session at $183.00, which reflects a solid yearly return of 23.42% and a year-to-date return of 14.68%. The average trading volume for the last 3 months aggregated at 377,018 shares.

The Zacks Rank #2 (Buy) stock still has enough fundamentals to help it surpass its yearly high. Strategic acquisitions, strong first-quarter results, a diversified revenue base and strong cash flow are some of the growth catalysts for the stock.

The company delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 35.6%. The long-term expected earnings growth rate for this stock is 17.2%.

Growth Drivers

TransDigm's shares have been trending higher since it acquired Elektro-Metall Export GmbH (EME GmbH) for $47.4 million on Mar 6, 2014. The acquisition was a strategic move by TransDigm as the nature of operations of EME GmbH, its products and commercial as well as military clients perfectly complement TransDigm's existing portfolio. This acquisition is expected to further strengthen the company's presence in the aerospace electromechanical actuators, electrical and electromechanical components and assemblies primarily for commercial aircrafts, helicopters and other specialty applications segments.     

This apart, TransDigm has been pursuing strategic acquisitions to broaden its reach in the highly competitive aerospace market. In Dec 2013, TransDigm Group completed the acquisition of Airborne Systems Inc. from Metalmark Capital in an all-cash deal valued at approximately $250 million.

Further, with respect to earnings performance, TransDigm Group's reported strong first-quarter fiscal 2014 results on Feb 4, 2014. Results were primarily driven by the company's strategic acquisitions in fiscal 2013, improving commercial aftermarket and strength in commercial aerospace.

This maker of components for commercial and military aircrafts reported adjusted earnings per share of $1.66, which comfortably surpassed the Zacks Consensus Estimate of $1.28, by 29.7%. The 10% per share increase was lower than the 15.2% increase of adjusted net income, primarily due to the higher share count in the quarter.

The company also raised its guidance for fiscal 2014 driven by positive synergies from its three recent acquisitions and to specially highlight the benefits of the Airborne Systems acquisition. It currently expects net sales to be in the range of $2.28 billion to $2.34 billion compared with the guidance of $2.1–$2.2 billion provided earlier.

Adjusted earnings per share are expected to be in the range of $7.35 a share to $7.65 a share, compared with the previous guidance of $7.00–$7.32 per share.

Other Stocks to Consider

Other stocks that look promising include Alliant Techsystems Inc. ATK, Teledyne Tech TDY and Aerovironment AVAV, all of which carry a Zacks Rank #2.