Image source: TransDigm Group.

The aerospace industry has been a bastion of strength in a tough macroeconomic environment worldwide, and component-maker TransDigm Group (TDG -0.65%) has done a good job of making the most of the opportunities that higher demand for aircraft has created. But coming into Tuesday's fiscal first-quarter financial report, TransDigm investors were nervous about some of the downbeat guidance that aircraft manufacturer Boeing (BA 0.15%) had posted recently, and they wanted to see TransDigm reassure them that the boom in aerospace was not over. TransDigm's results didn't allay those fears, and even a boost in guidance for fiscal 2016 didn't keep the stock from falling. Let's take a closer look at what TransDigm Group said and what could lie ahead for the company.

TransDigm hits turbulence
TransDigm Group's fiscal first-quarter results didn't live up to the high expectations that investors had set for the component-maker. Revenue rose almost 20% to $701.7 million, but that was far below the $738 million consensus estimate for sales for the company. Adjusted net income climbed an even more impressive 27% to $128.7 million. Nevertheless, the resulting adjusted earnings of $2.27 per share was $0.05 below what investors had wanted to see.

Beneath the surface, though, TransDigm's results showed some of the pressures that the aerospace company is dealing with. The only reason that TransDigm posted any revenue growth at all was because of its four major acquisitions over the past year, which added $121.4 million to its top line. Without those transactions, organic sales actually fell 1%. Still, TransDigm made the most of its revenue, using proprietary products and moves to boost productivity to offset higher interest expenses on its debt and other acquisition-related costs.

TransDigm CEO Nicholas Howley pointed to strength in the commercial transport industry on both the aftermarket and original-equipment manufacturing sides of the segment, but revenue related to business jets and helicopters fell off. "Our constant focus on our value-based operating strategy, including our first quarter cost reductions, continued to show results," Howley said.

Can TransDigm bounce back?
In addition to those efforts, TransDigm continues to look for smart acquisitions to bolster its presence in the industry. The company trumpeted its recently completed tender offer for aircraft and weapons lifting and pulling systems maker Breeze-Eastern for just over $200 million, and TransDigm seems ready to jump on additional opportunities if they arise in the future.

The Breeze-Eastern transaction was one reason TransDigm cited for boosting its guidance, but the increases didn't give investors much more than they already expected from the company's future. New sales guidance of $3.144 billion to $3.188 billion was higher by roughly 2%, but the current consensus forecast for full-year revenue is near the upper end of that range. Similarly, adjusted earnings of $10.65 to $10.89 per share represented a $0.32 per share boost, but the current forecast among investors for $10.75 per share makes it clear that investors had already allowed for the positive impact from the acquisition.

Yet TransDigm also expressed some concerns about the near-term future. In the company's conference call, Howley said that "we continue to have some concerns about duration of the commercial transport OEM cycle," noting that softening economic activity could affect travel. That's consistent with what Boeing's somewhat tepid guidance suggests, even though Boeing CEO Dennis Muilenburg said in Boeing's conference call in late January that "the fact that we are ramping up should convey our general confidence in the marketplace."

TransDigm shares moved sharply downward on the earnings and revenue miss, falling 13% for the session following the announcement. With the stock market so skittish, TransDigm will have to prove to investors that it can survive any potential global economic slowdown and still produce the long-term growth that investors want. Otherwise, the company will have a hard time pushing its share price back higher.