TDG - Embedded Expectations Analysis - 2019 03 12
TransDigm Group Incorporated (TDG:USA) currently trades at historical highs relative to UAFRS-based (Uniform) Earnings, with a 23.6x Uniform P/E. Even at these levels, the market has bearish expectations for the firm, and management has concerns about their ability to sustain margin improvement and revenue growth, commercial OEM market weakness, and their commitment to seek M&A opportunities.Specifically, management may be exaggerating the performance of their aftermarket freight segment relative to expectations, and may lack confidence in their ability to sustain improvements in margins and gross profit. Moreover, they may be concerned about the seasonality of bookings, and may lack confidence in the sustainability of revenue growth, especially for larger cabin jets. Furthermore, management may have concerns about continued weakness in demand for wide-bodies, and may be downplaying the potential for further weakness in the commercial OEM market. Finally, they may be exaggerating their commitment to seek M&A opportunities, and may lack confidence in their ability to execute another Esterline-sized acquisition.
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.
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