Tdg Engine
Source: TransDigm.

Investors in aerospace components specialist TransDigm Group (NYSE:TDG) have celebrated the company's success in recent years, as the company has been able to turn its exposure to the booming aircraft-manufacturing industry into substantial profit growth. By serving both original manufacturers and the companies that help to maintain older aircraft, TransDigm has sought to extend its reach to supply as many potential customers as possible. Coming into its fiscal third-quarter financial report Tuesday morning, TransDigm investors have continued to watch their stock climb higher, and they hope the company can keep growing at its recent pace. Let's take an early look at what TransDigm Group will probably say in its report and what investors should expect going forward.

Stats on TransDigm Group

Analyst EPS Estimate

$2.26

Change From Year-Ago EPS

11.9%

Revenue Estimate

$720.12 million

Change From Year-Ago Revenue

17.9%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance

Can TransDigm earnings keep climbing?
Investors have boosted their views on TransDigm Group earnings in recent months, raising their fiscal third-quarter projections by a nickel per share and boosting full-year fiscal 2015 and 2016 estimates by nearly $0.25 per share each. The stock has continued its upward climb, rising another 6% since late April.

Much of TransDigm's gains came immediately following its fiscal second-quarter report in May. The company rebounded from a rare earnings miss in the previous quarter, riding the strength of its acquisition of Elektro-Metall last year to produce solid earnings growth of around 23%. Warnings that TransDigm wouldn't be able to keep up the pace of its sales growth this year had initially worried investors, but even though a rise of just 5% for revenue was more sluggish than most had expected, shareholders were happy that TransDigm managed to boost its profit margins, and they responded favorably to upgraded guidance from the company for the remainder of the fiscal year.

Acquisitions will continue to play a key role in TransDigm's long-term growth. With the purchase of Telair Cargo Group in March, investors will look forward to seeing how big an impact the cargo-handling unit has on its overall results. Moreover, the completed purchase of extruded plastic-part manufacturer Pexco Airspace should help add yet another component to TransDigm's already extensive list of parts and systems that it provides for major aircraft manufacturers. Just last week, TransDigm added yet another company to its long list of targets, acquiring aerospace pneumatic and hydraulic component systems specialist PneuDraulics for $325 million in cash. PneuDraulics gets about 85% of its sales from the commercial aerospace industry, and CEO Nicholas Howley noted that by expanding content on key aircraft platforms like the 787 and A350, PneuDraulics should help boost TransDigm's prospects in serving important customers even more effectively.

Still, the big-picture issue that TransDigm must constantly address is whether strength in the aerospace industry will continue at its current pace. Right now, many airlines are going through major upgrade cycles, taking older aircraft and replacing them with more fuel-efficient models that require less maintenance and allow them to put their best foot forward in serving the passengers who fly on their planes. Unprecedented levels of profitability for airlines have helped finance these purchases, but recently, airline stocks have started to fall back as investors worry that the industry's past history of boom and bust cycles could well repeat itself in the near future. At some point, TransDigm will have to deal with an industry slowdown, and having a strategy in place before that happens could be instrumental in how well it fares during a tough future period.

In the TransDigm Group earnings report, be sure to keep an eye on comments the company makes about its most recent acquisitions and how well they have done in working their way into the broader TransDigm corporate culture. At the same time, though, be sure to look for signs of organic growth in its existing business segments as well. As smart as some of TransDigm's acquisitions have been, investors will want to see the company make the most of all of its opportunities to grow.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends TransDigm Group. The Motley Fool owns shares of TransDigm Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.