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TransDigm Stock Dips on Weak Fiscal 2017 Guidance

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TransDigm declares fiscal 4Q16 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. On November 14, TransDigm declared its 4Q16 earnings for the quarter ending September 30.

The company’s adjusted earnings per share rose 10.8% year-over-year to $2.77 and beat estimates by $0.09. The increase in earnings was mainly driven by growth in sales. Net sales were up 8.1% to $875.2 million as the integration of some of its acquisitions made last year offset organic declines in the quarter. The rest of the earnings increase was driven by operating margin expansion as a lower tax rate and productivity gains offset higher interest expenses.

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TransDigm’s fiscal 2017 guidance

TransDigm provided weak guidance for fiscal 2017, making investors wonder whether years of spectacular double-digit growth could be drawing to a close. Consequently, the stock closed 7.1% lower at $252.94 the day the company declared its earnings. The company stated that the wide body market continued to be soft and business jet weakness is expected to stretch into the next fiscal year as well. The company expects revenues in fiscal 2017 to rise 12% to $3.5 billion with most of it coming from acquisitions. Organic revenues are expected to grow 8%. Fiscal 2017 EBITDA is expected to be around 47.5% of revenues and grow 13% year-over-year to $1.7 billion. Adjusted earnings per share are expected to increase just 4% to $11.98 in fiscal 2017.

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