Source: TransDigm.

Given the high demand for commercial aircraft, it's no surprise the stocks of companies related to the aerospace industry have soared through the roof in recent years. With those prospects for heightened purchase activity seeming to be unending at least for the moment, shareholders of TransDigm Group (TDG -2.13%) hoped the aircraft-parts maker's fiscal second-quarter earnings results on Tuesday morning would show continued impressive growth. TransDigm's results didn't include as much sales growth as most had expected, but a stronger boost in earnings pointed the way toward better potential for future gains. Still, shareholders weren't impressed with the overall performance, at least in the near term. Let's look more closely at TransDigm's latest results and what they say about the company's future.

How TransDigm fared last quarter
During the quarter, TransDigm grew both its top and bottom lines. Net sales of $619 millon were up 4.8% from the year-ago quarter, but well shy of the 7% growth most of those following the stock had expected. Net income jumped a much healthier 23% to $110.9 million, however; that helped push adjusted earnings up to $2.11 per share, 13% better than last year's performance and a dime higher than investors' consensus estimate.

The company continued to rely on its acquisition strategy to push growth rates higher. Looking solely at organic net sales, TransDigm enjoyed low-single-digit percentage growth, with the acquisition of Elektro-Metall last year responsible for most of the balance of TransDigm's revenue gain. The parts maker cited the strength of its proprietary products, as well as boosts in productivity, as helping to drive earnings higher even in the face of less robust revenue growth.

CEO Nicholas Howley pointed not just to the strength in the business but also to an ambitious level of activity in recent months. "This was a good quarter for the commercial transport aftermarket," Howley said in a press release. "However, softness in the business jet and helicopter aftermarket pulled the overall quarterly commercial aftermarket increase down." Nevertheless, Howley still has high hopes for driving stronger returns in the future.

Source: TransDigm.

Indeed, TransDigm felt confident enough in its growth to boost its guidance for 2015. The company now expects $2.66 billion to $2.69 billion in sales, up about $150 million from previous estimates. Adjusted earnings per share of $8.49 to $8.75 would represent 9% to 13% growth, reflecting a roughly 5% increase in guidance from previous projections.

TransDigm's huge deal flow
The biggest reason for the upward revisions in TransDigm's guidance is that the company has been unexpectedly active in the merger and acquisition space. In late March, the company spent about $725 million to buy cargo loading and handling leader Telair Cargo Group. After the end of the quarter, TransDigm added two more deals for the aircraft-faucet specialist Franke Aquarotter and plastics producer Pexco Aerospace.

The potential for further gains from the buyouts is huge. As Howley noted, "All three of these businesses are primarily commercial transport focused with significant proprietary and aftermarket content. All three acquisitions fit well with our consistent strategy and should yield private equity-like returns for our shareholders."

Still, TransDigm is subject to the ups and downs of aerospace, and today's decline in the company's shares largely reflects concerns about the future of the aircraft manufacturing industry. Airlines have already made massive orders, leaving doubt about how much future activity remains available. At the same time, TransDigm must rely on the manufacturers for which it supplies parts to conduct their end of the production process efficiently. Any delays creep can adversely affect TransDigm's results.

In the long run, TransDigm Group appears to be doing everything it should to grow at the fastest rate possible. Even if shares back away from their recent highs, TransDigm's latest numbers point to continued good times for the foreseeable future.