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1. Company Snapshot

1.a. Company Description

TransDigm Group Incorporated designs, produces, and supplies aircraft components in the United States and internationally.Its Power & Control segment offers mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, databus and power controls, sensor products, switches and relay panels, hoists, winches and lifting devices, and cargo loading and handling systems.This segment serves engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies, and repair depots.


The company's Airframe segment provides engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, cockpit security components and systems, cockpit displays, engineered audio, radio and antenna systems, lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, thermal protection and insulation products, lighting and control technology, and parachutes.This segment serves airframe manufacturers, cabin system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies, and repair depots.Its Non-aviation segment offers seat belts and safety restraints for ground transportation applications; electro-mechanical actuators for space applications; hydraulic/electromechanical actuators and fuel valves for land-based gas turbines; refueling systems for heavy equipment used in mining, construction, and other industries; and turbine controls for the energy and oil and gas markets.


This segment serves off-road vehicle and subsystem suppliers, child restraint system suppliers, and satellite and space system suppliers; and manufacturers of heavy equipment.TransDigm Group Incorporated was founded in 1993 and is based in Cleveland, Ohio.

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1.b. Last Insights on TDG

TransDigm Group Incorporated's recent performance was negatively impacted by its Q3 earnings miss, with adjusted earnings per share of $9.60, falling short of estimates. Sales growth was 9.3%, but also missed expectations. The company's guidance for fiscal 2025 was narrowed, and while EBITDA margin reached 54.4%, concerns about slowing Boeing and Airbus production weighed on results. Additionally, the company's decision to issue $5B in debt to fund a special dividend of $90 per share raised concerns about its capital allocation strategy.

1.c. Company Highlights

2. TransDigm's Q4 2025 Earnings: A Strong Finish to the Year

TransDigm Group Incorporated reported a robust Q4 2025, with revenue and EBITDA as defined margin exceeding the company's most recent guidance. The company's revenue growth was driven by a healthy commercial aftermarket channel, robust defense market channel, and a return to growth in commercial OEM revenues. EBITDA as defined margin came in at 54.2% in Q4, fueled by commercial aftermarket growth and the company's focus on operating strategy. Earnings per share (EPS) was $10.82, beating analyst estimates of $10.04. The company's financial performance was also reflected in its operating cash flow, which exceeded $500 million, and a cash balance of $2.8 billion at the end of the quarter.

Publication Date: Nov -13

📋 Highlights
  • EBITDA Margin Surpassed Guidance:: Q4 EBITDA as defined margin hit 54.2%, driven by commercial aftermarket growth and operational focus.
  • Strong Cash Flow and Balance Sheet:: Generated $500M operating cash flow, $2.8B cash balance, and over $2B pro forma after the Simmons acquisition.
  • 2026 Revenue and EBITDA Guidance:: Midpoint revenue targets $9.85B (+12% YoY), with EBITDA guidance at $5.15B (52.3% margin, +8% YoY).
  • Capital Allocation Strategy:: Allocated $7B in 2025 across M&A and shareholder returns, including a $90/share special dividend and $600M buybacks.
  • Margin Expansion and Acquisitions:: Targeting 50-100 bps annual margin improvement in base businesses, with recent tuck-in M&A valued at $300M.

Segment Performance

The commercial aftermarket segment saw 11% growth in Q4, driven by the engine and interior businesses. The defense business also performed well, with robust growth in the quarter. The company's commercial OEM revenues returned to growth, and the defense market channel revenue grew robustly. The company's guidance for fiscal 2026 suggests continued growth across these segments, with commercial OEM revenue growth expected in the high single-digit to mid-teens percentage range.

Outlook and Guidance

For fiscal 2026, TransDigm expects revenue growth of approximately 12% over the prior year, with a midpoint of revenue guidance at $9.85 billion. EBITDA as defined guidance is expected to be around $5.15 billion, up approximately 8% with an expected margin of around 52.3%. The company expects to generate significant additional cash throughout fiscal 2026, with a focus on reinvesting in businesses, disciplined M&A, and returning capital to shareholders. Analysts estimate next year's revenue growth at 11.9%, which is in line with the company's guidance.

Valuation and Metrics

TransDigm's current valuation metrics suggest a premium valuation, with a P/E Ratio of 37.53 and an EV/EBITDA of 21.44. The company's Net Debt / EBITDA ratio is 4.98, which is relatively high, but the company expects to reduce this ratio to around five times by the end of fiscal 2026. The company's ROIC is 15.46%, indicating a strong return on invested capital. The Dividend Yield is 6.88%, which is attractive for income investors.

Capital Allocation and M&A

TransDigm remains committed to its capital allocation strategy, focusing on disciplined M&A, returning capital to shareholders, and reinvesting in businesses. The company has made several small tuck-in M&A deals, which are expected to contribute to growth. The recent acquisitions, Simmons and Servotronics, are expected to see margin improvement over time, with no fundamental differences that would prevent them from reaching TransDigm's typical margins.

3. NewsRoom

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Groupe la Francaise Acquires New Stake in Transdigm Group Incorporated $TDG

Dec -04

Source: defenseworld.net

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Transdigm Group Incorporated (NYSE:TDG) Given Average Recommendation of “Moderate Buy” by Analysts

Dec -04

Source: defenseworld.net

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American Century Companies Inc. Trims Holdings in Transdigm Group Incorporated $TDG

Nov -26

Source: defenseworld.net

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Alger Growth & Income Fund Q3 2025 Portfolio Update

Nov -18

Source: seekingalpha.com

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Banco Bilbao Vizcaya Argentaria S.A. Sells 155 Shares of Transdigm Group Incorporated $TDG

Nov -17

Source: defenseworld.net

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Alger Dynamic Opportunities Fund Q3 2025 Portfolio Review

Nov -14

Source: seekingalpha.com

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TransDigm (TDG) Q4 Earnings: Taking a Look at Key Metrics Versus Estimates

Nov -13

Source: zacks.com

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TransDigm Group Inc (TDG) Q4 2025 Earnings Call Highlights: Record Special Dividend and Robust Cash Flow Amidst Market Challenges

Nov -12

Source: gurufocus.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.97%)

6. Segments

Power & Control

Expected Growth: 6.5%

TransDigm Group's Power & Control segment growth of 6.5% is driven by increasing demand for aerospace and defense products, favorable pricing, and operational efficiency. The company's focus on aftermarket sales, R&D investments, and strategic acquisitions also contribute to growth. Strong performance in commercial aerospace and military programs further supports the segment's expansion.

Airframe

Expected Growth: 7.5%

The 7.5% growth in Airframe segment from TransDigm Group Incorporated is driven by increasing demand for commercial and military aircraft, coupled with the company's strategic acquisitions and organic growth initiatives. The growth is also attributed to TransDigm's strong position in the aerospace industry, providing high-quality engineered components and systems.

Non-Aviation

Expected Growth: 6.0%

Non-Aviation growth at TransDigm Group Incorporated is driven by increased demand for precision-engineered components in industrial and medical markets. Strong performance in commercial aftermarket and growth in medical device sales contribute to 6.0% growth. Additionally, strategic acquisitions and operational efficiency improvements support the segment's expansion.

7. Detailed Products

Aerospace Fasteners

TransDigm Group Incorporated provides a wide range of aerospace fasteners, including bolts, nuts, screws, and rivets, designed for use in commercial and military aircraft, as well as spacecraft.

Aircraft Bearings

The company offers a variety of aircraft bearings, including ball bearings, roller bearings, and bushings, designed for use in aircraft engines, gearboxes, and other applications.

Electromechanical Actuation Systems

TransDigm Group Incorporated provides electromechanical actuation systems, including electric motors, gearboxes, and control systems, for use in aircraft, spacecraft, and missiles.

Aircraft Lighting

The company offers a range of aircraft lighting products, including interior and exterior lighting, navigation lights, and warning lights.

Aerospace Sealing Solutions

TransDigm Group Incorporated provides a range of aerospace sealing solutions, including O-rings, gaskets, and seals, designed for use in aircraft, spacecraft, and missiles.

Aircraft Interiors

The company offers a range of aircraft interior products, including seats, cabin components, and galley equipment.

Aerospace Test and Simulation

TransDigm Group Incorporated provides aerospace test and simulation products, including test equipment, simulation systems, and data acquisition systems.

8. TransDigm Group Incorporated's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for TransDigm Group Incorporated is moderate due to the presence of alternative products and services in the aerospace and defense industry.

Bargaining Power Of Customers

The bargaining power of customers for TransDigm Group Incorporated is low due to the company's strong market position and limited customer concentration.

Bargaining Power Of Suppliers

The bargaining power of suppliers for TransDigm Group Incorporated is moderate due to the presence of multiple suppliers and the company's ability to negotiate prices.

Threat Of New Entrants

The threat of new entrants for TransDigm Group Incorporated is low due to the high barriers to entry in the aerospace and defense industry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry for TransDigm Group Incorporated is high due to the presence of several established competitors in the aerospace and defense industry, leading to a competitive market environment.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 111.26%
Debt Cost 7.84%
Equity Weight -11.26%
Equity Cost 10.87%
WACC 7.50%
Leverage -988.05%

11. Quality Control: TransDigm Group Incorporated passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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TransDigm Group

A-Score: 6.4/10

Value: 3.0

Growth: 7.9

Quality: 6.7

Yield: 9.0

Momentum: 4.0

Volatility: 8.0

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A-Score: 4.7/10

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Quality: 4.5

Yield: 6.0

Momentum: 1.0

Volatility: 9.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

1346.86$

Current Price

1346.86$

Potential

-0.00%

Expected Cash-Flows