What happened

Shares of TransDigm Group (NYSE:TDG) were up 11% in February, according to data provided by S&P Global Market Intelligence, after the aerospace component supplier reported strong quarterly results and provided an optimistic outlook for the months to come.

So what

In early February, TransDigm reported fiscal first-quarter earnings of $3.85 per share, well ahead of the $3.43 consensus, on strong 11.6% organic sales growth. The company reported double-digit sales growth for both its defense and commercial businesses and saw commercial aftermarket orders jump 20%.

Check out the latest earnings call transcript for TransDigm.

C-130 Cockpit Avionics System

TransDigm's product portfolio will soon include Esterline's C-130 Cockpit Avionics System upgrade. Image source: Esterline.

Investors also were likely encouraged by commentary during the call that followed, with management offering insight into a Department of Defense investigation that has been hanging over the company. Executive chairman Nick Howley said "There has been no allegation of any wrongdoing or illegality," adding that the full report would be released to the public in the months to come.

Management also said it expects TransDigm to close its $4 billion purchase of Esterline Technologies (NYSE:ESL) before the end of April, expanding its product portfolio.

Now what

TransDigm is a best-of-breed aerospace provider, focused on proprietary parts that can command pricing power and generating adjusted margins approaching 50%. The latest results show no sign of the company's existing businesses weakening, and if TransDigm is able to apply the integration techniques it has used in its previous 60 acquisitions on Esterline, profitability should improve at the acquired businesses in the quarters to come.

The company's margins are attention-grabbing, and the Pentagon investigation was central to the bear argument that TransDigm's level of profitability was unsustainable. With that risk now seemingly fading, TransDigm looks well positioned to continue delivering outsized returns.

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