2Q Beats Big Aided by Tax Rate; Raising Estimates
- Adjusted 2Q18 (March) EPS was up 25% to $3.79 (vs $3.02 last year), and 20 cents above our estimate including 41 cents of tax benefits, with operating profit up a better-than-anticipated 11%;
- Nick Howley (65), former CEO, is transitioning to an Executive Chairman role effective immediately, with Kevin Stein (50), formerly President and COO, now CEO;
- Due primarily to the 2Q18 outperformance, our FY18 EPS estimate is now $17.77 (from $17.24 and Company raised guidance to $17.35-to-$17.99 [from $16.95-to-$17.59]), up 43.5% from FY17, benefitting from the new U.S. tax law and recent acquisitions;
- Our FY19 EPS projection is now $17.04 (from $16.33), off 4% from our FY18 estimate, given the tax benefit in 1Q18, although operating income is projected up 8%;
- The Company plans to issue up to $1.2 billion in additional debt to refinance existing obligations and fund recent acquisitions.
TransDigm Group is a holding company. Through its subsidiaries, the company designs, produces and supplies aircraft components for use on commercial and military aircraft. The company's segments are: Power and Control, which develops, produces and markets systems and components that provide power to or control power of the aircraft utilizing electronic, fluid, power and mechanical motion control technologies; Airframe, which develops, produces and markets systems and components that are used in non-power airframe applications utilizing airframe and cabin structure technologies; and Non-aviation, which develops, produces and markets products for non-aviation markets.
Great Lakes Review is located in Cleveland, Ohio, was founded in 1981 and became a division of Wellington Shields & Co. LLC in 2011. Great Lakes Review is a research boutique focused on the fundamentally-oriented investor seeking companies that dominate their respective specialty niche regardless of industry. The objective is to make money for the long-term by gradually accumulating a diversified portfolio from a universe of no more than 30 companies. Although short-term-oriented accounts will be alerted to trading opportunities, aggressive sell recommendations are triggered only by a deterioration in long-term fundamentals, not by short-term blips or investor fancy. Coverage of those names that lose their earnings momentum or earnings predictability may be dropped and replaced with more vital candidates.
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