TransDigm: 10% Annual Growth On EBITDA, 21% On Free Cash Flow Makes This A Buy

seekingalpha11-20 01:00

TransDigm Group Incorporated achieved over 20% growth in sales and EBITDA, beating FY24 estimates and guiding for continued double-digit growth in FY25.The company’s revenue is primarily driven by ...

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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nTransDigm: 10% Annual Growth On EBITDA, 21% On Free Cash Flow Makes This A Buy\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-20 01:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4738702-transdigm-10-percent-annual-growth-on-ebitda-21-percent-on-free-cash-flow-make-buy><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>TransDigm Group Incorporated achieved over 20% growth in sales and EBITDA, beating FY24 estimates and guiding for continued double-digit growth in FY25.The company’s revenue is primarily driven by ...</p>\n\n<a href=\"https://seekingalpha.com/article/4738702-transdigm-10-percent-annual-growth-on-ebitda-21-percent-on-free-cash-flow-make-buy\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4588","symbol_name":"碎股","start_time":0,"source_url":"https://seekingalpha.com/article/4738702-transdigm-10-percent-annual-growth-on-ebitda-21-percent-on-free-cash-flow-make-buy","article_id":"2484200449","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1062997830/image_1062997830.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2484200449","pubTimestamp":1732035653,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"TransDigm Group Incorporated achieved over 20% growth in sales and EBITDA, beating FY24 estimates and guiding for continued double-digit growth in FY25.The company’s revenue is primarily driven by aft","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4588":"碎股","BK4550":"红杉资本持仓","BK4187":"航天航空与国防","LU0198837287.USD":"UBS (LUX) EQUITY SICAV - USA GROWTH \"P\" (USD) ACC","TDG":"TransDigm","BK4585":"ETF&股票定投概念"},"translate_title":"TransDigm：EBITDA年增长率为10%，自由现金流年增长率为21%，值得买入","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TDG":0.9},"content_text":"TransDigm Group Incorporated achieved over 20% growth in sales and EBITDA, beating FY24 estimates and guiding for continued double-digit growth in FY25.The company’s revenue is primarily driven by aftermarket sales, with a strong outlook for mid-to-high single-digit growth across various segments.Despite potential challenges, TransDigm remains attractive due to its successful M&A strategy and potential for special dividends, offering a 16% upside.Valuation targets suggest a $1,450 price with special dividends or $1,500 without, reinforcing my belief that TransDigm stock is a buy.   RgStudio  In August, I covered TransDigm Group Incorporated (NYSE:TDG) and reiterated my buy rating for the company. The stock, however, has traded sideways ever since and underperformed the 11.34% return of the S&P 500 (SP500). Aerospace shares have been under some pressure due to fears that cost-cutting on government expenses under the next administration will affect defense budgets and pricing. In Europe, there are more signs of peace in Ukraine being an option, which just weeks ago was unthinkable. In this report, I will be discussing the earnings of TransDigm and explain why I believe the stock remains a buy. TransDigm Sales And EBITDA Grow By More Than 20%   TransDigm TransDigm saw its revenues increase by 21% to $7.94 billion. Commercial OEM sales grew 20% for the full year and 13% in Q4, with commercial transport revenues up 8% and business jet and helicopter revenues up 21%. Aftermarket sales were up 12% for the full year and up 8% during the quarter, driven by 7% growth in commercial transport revenues and 13% growth in business jet and helicopter aftermarket sales. What is interesting to note is that the commercial transport revenues both in aftermarket and OEM sales trailed the commercial airplanes revenues. That Commercial OEM sales are not growing double digits can be explained by the aerospace supply chain issues and quality and manufacturing issues at Boeing (BA) that are keeping production rates below targeted levels. I believe when it comes to aftermarket sales, it is unfeasible that we will see double-digit growth all the time as the comp is becoming more challenging. Defense saw good growth, with 19% revenue growth in the year and 16% during the quarter. Gross profit margins expanded slightly during the year on higher volumes while SG&A increased in absolute and relative sense driven by higher stock-based compensation and integration related expenses. Interest expenses increased, driven by the issuance of new debt. Adjusted EBITDA margin expanded from $3.4 billion to $4.2 billion, indicating 23% growth. For the full year, revenues came in $12.70 million higher than analysts had expected, while earnings per share of $33.49 were $0.50 higher than expected. Looking at the FY24 results, we saw strong >20% EBITDA growth as well as >20% sales growth, but this was largely in line with expectations. TransDigm Guides For Double-Digit Growth   TransDigm It is important to keep in mind that over 75% of the company’s EBITDA is generated from aftermarket sales and less than 25% comes from OEM sales. So, TransDigm is not shielded from the risk on Boeing programs, but most of the profits are generated elsewhere. At the same time, we do see that commercial airplane aftermarket sales growth is softening a bit, and so we should keep in mind that replicating the year-on-year growth rate might be challenging. Nevertheless, the company aims for mid-single digit growth in commercial OEM sales and high single digit growth to low double-digit growth in commercial aftermarket sales and high single digit growth in defense. The midpoint of the revenue guidance is $8.85 billion and provides 11.5% growth in sales, which is not as impressive as the 21% growth seen in FY24 but still strong and just $50 million lower than the consensus estimates among analysts. Adjusted EBITDA is guided at $4.685 billion at the mid-point, indicating 12.2% growth and pointing at further margin expansion. Adjusted EPS of $36.82 is slightly lower than the $37.55 that analysts are expecting. So, the guidance does support double-digit growth, but the growth rates are tapering. What will be interesting to see is whether TransDigm will be actively pursuing M&A in FY25. With Triumph Group looking for a buyer and Boeing looking to sell some of its operations, it does seem that there could be some intriguing businesses to acquire for TransDigm. TransDigm Remains Attractive With Special Dividend Potential To determine multi-year price targets, The Aerospace Forum has developed a stock screener which uses a combination of analyst consensus on EBITDA, cash flows and the most recent balance sheet data. Each quarter, we revisit those assumptions, and the stock price targets accordingly. In a separate blog, I have detailed our analysis methodology.   The Aerospace Forum TransDigm has a median EV/EBITDA multiple that exceeds that of its peers, and the reason for that is the company derives part of its growth from M&A, and it has been quite successful in doing so. Apart from that, the company also pays significant special dividends from time to time. There is no clear line of sight on M&A in the upcoming years, but I have assumed that absent of M&A, the company will continue to return value to shareholders through special dividends. EBITDA is set to grow at 10.4% annually, and free cash flow is even expected to grow at 21.1%. I believe those compelling growth figures and our assessment shows that this has not been fully factored into the stock price yet. TransDigm’s FY25 started in October and valuing the stock one-year ahead of earnings provides a $1,450 price target with 16% upside and a special dividend to be paid in the years ahead. Absent of a special dividend payment, the price target would be $1,500. So, I still believe that the stock is a buy. Conclusion: TransDigm Stock Remains A Buy TransDigm beat estimates on earnings and revenues for FY24, and FY25 seems to be another year of double-digit growth for the company. From a valuation perspective, our price target excluding a special dividend has increased by $50. I believe that in case the company does not locate suitable acquisition targets, it will focus its cash balance on returning value to shareholders. I believe that currently there are some potential acquisition targets that could bolster TransDigm’s business in the long term.  Either way, with or without acquisitions, I continue to believe that TransDigm Group Incorporated stock is a buy. 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