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TransDigm Group (TDG) to Report Q1 Earnings: What's in Store?

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Transdigm Group Incorporated (TDG - Free Report) is set to report first-quarter fiscal 2021 results on Feb 9, before market open.

In the last reported quarter, the company delivered an earnings surprise of 52.11%. Moreover, it surpassed the Zacks Consensus Estimate in the trailing four quarters, delivering an earnings surprise of 37.24%, on average.

Let’s see how things have shaped up prior to this announcement.

Factors to Consider

TransDigm Group’s commercial aftermarket revenues have been witnessing sharp declines over the past couple of quarters, owing to COVID-19 induced dismal air traffic. Although from the beginning of the fiscal fourth quarter, some uptick was observed in the commercial aerospace, those were not enough to boost the company’s revenues. A similar trend is expected to have impacted the company’s fiscal first quarter revenues as well, with the pandemic still persisting. 

Its commercial Original Equipment Manufacturer (OEM) sales have also been suffering in the recent times, courtesy of the pandemic impacts. To this end, during the fiscal fourth quarter conference call, TransDigm’s management revealed that demand for its commercial OEM products will continue to be significantly reduced during fiscal 2021 due to reductions in OEM production rates and airlines deferring or canceling new aircraft orders. Such trend must have had an adverse impact on the company’s overall revenues in the soon-to-be-reported quarter.

Notably, the Zacks Consensus Estimate for fiscal first-quarter revenues is pegged at $1.12 billion, indicating a deterioration of 23.7% from first-quarter fiscal 2020.

Such dismal sales projections make us skeptical about the company’s fiscal first-quarter earnings. Moreover, the impact of low commercial aftermarket revenues has been hurting operating margin, which might have been the case in the fiscal first quarter as well, thereby pulling down its bottom line.

The Zacks Consensus Estimate for earnings stands at $2.09 per share, implying a plunge of 57.6% from the year-ago quarter’s reported figure.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for TransDigm Group this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But this is not the case here.

Earnings ESP: The company’s Earnings ESP is -10.47%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: TransDigm Group carries a Zacks Rank #2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Defense Releases

Raytheon Technologies Corporation’s (RTX - Free Report) fourth-quarter 2020 adjusted earnings per share (EPS) of 74 cents outpaced the Zacks Consensus Estimate of 71 cents by 4.2%.

Lockheed Martin (LMT - Free Report) reported fourth-quarter 2020 earnings from continuing operations of $6.38 per share, which came in line with the Zacks Consensus Estimate.

Textron Inc. (TXT - Free Report) reported fourth-quarter 2020 adjusted earnings of $1.06 per share, which exceeded the Zacks Consensus Estimate of 91 cents by 16.5%.

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