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TransDigm (TDG) Adds 3 Aerospace Product Lines to Portfolio

TransDigm Group Incorporated TDG announced the recent acquisition of three add-on aerospace product lines, for a total consideration of roughly $100 million.

These product lines mainly comprise proprietary, sole-source products with significant aftermarket content. These product lines are in sync with the company’s long-term plan and reflect TransDigm’s strategy to acquire proprietary aerospace businesses with significant aftermarket content, in a bid to fortify its core business.

The acquired business lines have combined revenues of about $32 million and will be consolidated into TransDigm’s existing businesses. The company financed the acquisitions through existing cash on hand.

These acquisitions will add to TransDigm’s product range with their proprietary products that enjoy strong positions on high use platforms, robust aftermarket content and an excellent reputation. Products offered by them include highly engineered aerospace controls, quick disconnect couplings, as well as communication electronics.

This step will enable TransDigm to expand its content on a number of substantial commercial and defense aerospace platforms.

The company frequently acquires proprietary businesses with significant aftermarket content, which fortifies its footprint in its core market and is in line with its operating strategies.TransDigm recently completed the acquisition of SCHROTH Safety Products GmbH, and aviation & defense assets and liabilities of Takata Corporation.

During the past year, TransDigm has acquired numerous businesses, including DDC, Young & Franklin/Tactair and Schroth. In the recently reported quarter, TransDigm posted an impressive 9.6% year-over-year increase in top line, as its accretive acquisitions contributed $70 million to sales. These businesses, which TransDigm acquired over the past year, include DDC, Young & Franklin/Tactair and Schroth.

The company has been enjoying revenue growth in majority of its commercial aftermarket businesses. About 90% of its sales are generated by proprietary products. This translates into consistent revenue generation capacity through all phases of the aerospace cycle. We believe that stable aftermarkets, which have historically produced higher gross margins, will continue to drive financial performance in the upcoming quarters for this Zacks Rank #2 (Buy) company.

These positive factors have reflected in the company’s stock price as well, in recent times. Over the past six months, TransDigm’s shares have appreciated 9.7%, outperforming the Zacks categorized Aerospace/Defense Equipment industry’s positive average return of 7.7%.

Other Stocks to Consider

Some other stocks worth considering in the industry include Rockwell Collins, Inc. COL, Raytheon Company RTN and Esterline Technologies Corporation ESL. While Rockwell Collins sports a Zacks Rank #1 (Strong Buy), Raytheon and Esterline Technologies carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Rockwell Collins surpassed earnings estimates in each of the trailing four quarters, resulting in an average surprise of 2.5%.

Raytheon has managed to beat estimates each time in the trailing four quarters, for a positive earnings surprise of 5.2%.

Esterline Technologies has a positive average earnings surprise of 34.9% for the trailing four quarters, beating estimates all through.

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