Transdigm declares 3Q16 earnings

Transdigm Group (TDG) is an aviation (XAR) component manufacturer with an installed base spanning over 95,000 military, transport, and general aviation (PPA) aircraft. The company derives more than 90% of its sales from proprietary technologies developed internally. Transdigm is the sole service provider of the products responsible for about three-quarters of its revenues. Over the years, Transdigm has become synonymous with high quality, reliability, and strong customer support—all essential ingredients in the regulation-intensive aerospace industry. Needless to say, the company is highly profitable. Transdigm declared its 3Q16 earnings on August 9 for the quarter ending on July 2.

Transdigm Shares Buzz in Response to a Strong 3Q16

Transdigm’s adjusted EPS

In 3Q16, Transdigm’s adjusted EPS (earnings per share) rose 36.8% year-over-year to $3.09—compared to consensus estimates of $2.82. The company’s adjusted net income rose 31.5%—led by a 15.4% increase in revenues and a 350 basis point improvement in gross profit margins. Its generally accepted accounting principles EPS was ~17.6% in 3Q16—compared to 14.3% in 3Q15. Also, anticipating a possible downturn, the company curtailed its headcount by 4% in the original equipment business earlier this year. Since that didn’t happen, the company’s cost structure as a percent of sales saw an improvement that was better than previously expected. Transdigm stock soared 2.9% in response to its earnings results and closed at $287.04 on August 9.

In the last few weeks, we published earnings reports on aerospace and defense players such as Spirit AeroSystems (SPR), Lockheed Martin (LMT), and General Dynamics (GD).

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