TransDigm Inc is one of the world’s leading designers and suppliers of engineered aircraft and aerospace components. The company’s components are used by a majority of the military and commercial aircraft in the world. The company generates 90% of total revenues from proprietary products and 80% of sales from products whose only source is TransDigm. The company has a strong moat in terms of intellectual property as well as its long list of products approved by the FAA and certified by other stringent standards. While the aerospace industry has struggled due to the low air travel happening in 2020, TransDigm has managed to weather the tough times because of its diversified business model that includes defense contracts as well as maintenance revenues.
TransDigm Reports Q42020 Earnings
TransDigm reported its Q42020 earnings results in November 2020. Revenues were down 24% year-on-year from $1.5 billion in the fourth quarter of 2019 to $1.1 billion in the fourth quarter of 2020. Adjusted earnings per share were also down significantly from $5.62 per share in Q42019 to $2.89 per share in Q42020. However, EBITDA margins were only down by a little more than 3%, at 42.4% from 45.9% achieved in Q42019.
Executive Chairman Nick Howley said, “For planning purposes, we are assuming a pickup in the second half of the year. Given the recent surge in COVID cases and the uncertainties I mentioned above, we hope and intend to be cautious in our planning, but we just don’t know.” Meanwhile, company CEO Kevin Stein said, “We believe the world will once again embrace travel in ever-growing numbers, but for now the timing of the recovery is uncertain. In the meantime, we will continue to make the necessary business decisions and remain focused on our value drivers.”
If you want to invest in aerospace stocks and feel buoyed by the commencement of vaccination drives across the world, the TransDigm is certainly a good candidate. Its stock has zoomed 3.7% in just the last 30 days after having closed at $617 on 12th January 2021. Larger players like Boeing ad General Dynamics haven’t performed very well lately in comparison. Another stock worth watching is Heico. It has gained some 3.6% in the past month.