TDG: 3Q Miss but Operating Income In-Line; Lowering Estimates
HOLD
- Adjusted 3Q18 (June) EPS was up 19% to $4.01 (vs $3.37 last year), 15 cents under our estimate due to higher interest/other expense and a tax rate greater than our projection, but with operating income in-line with what we modeled;
- Due to the 3Q miss, our FY18 EPS estimate is now $17.71 (from $17.77 and Company narrowed guidance of $17.45-to-$17.77 [from $17.35-to-$17.99]), up 43% from FY17, given a tax rate modeled at 9% for the year (vs 30%);
- Our FY19 EPS projection is now $16.71 (from $17.04), off 6% from our FY18 estimate, due to a tax rate estimated at 23% (vs 9%), although operating income is projected up 11%;
- Cash is projected to be $2 billion at the end of FY18 absent additional acquisitions, which will likely lead to another special dividend in the absence of appropriate acquisition candidates.
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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