3Q Beats by 15 Cents; Lowering FY18 Estimate On Higher Interest Expense
- Adjusted 3Q17 (June) EPS was $3.30 (vs $3.09 last year), 15 cents above our estimate due to sales $27 million (or 3%) above what we modeled and an operating margin 50 bps above our projection;
- Our FY17 EPS estimate remains $12.33, up only 7% from FY16, as good operational performance (operating income modeled up 14%) is being held back by interest expense projected up $116 million for the year as well as a slightly higher tax rate;
- Our FY18 EPS estimate is now $13.73 (from $14.32), up 11% from our FY17 projection due to increased interest expense to fund another special dividend;
- A new debt offering will be used to fund a potential special dividend of $1.00 billion-to-$1.25 billion or $18-to-$23 per share although net debt-to-EBITDA will rise to around a record 6.8x.
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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