Please ensure Javascript is enabled for purposes of website accessibility

Why TransDigm Group Incorporated's Shares Dropped 16% Today

By Travis Hoium - Feb 9, 2016 at 3:28PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Weaker-than-expected earnings couldn't offset strong guidance for the aerospace manufacturer today.

What: Shares of aircraft components maker TransDigm Group Incorporated (TDG 0.80%) fell as much as 16% on Tuesday after the company reported fiscal first-quarter earnings.

So what: Net sales for the quarter were up 20% to $701.7 million and net income jumped 20% to $114.9 million, or $1.97 per share. After pulling out one-time items, earnings were $2.27 per share.  

Analysts were expecting $737.9 million in revenue and earnings of $2.32 per share, so it's that earnings miss that investors are reacting to today.  

2016 guidance was also updated, including an increase in expected revenue from $3.07 billion to $3.12 billion to a range of $3.14 billion to $3.19 billion. Earnings per share are now expected to be $9.48 to $9.72 from a previous range of $9.20 to $9.44.  

Now what: While results are improving, it should be noted that organic sales did decline slightly in the quarter. Acquisitions more than offset the decline, though, and that's why you see the big revenue and earnings growth above. With little organic growth, however, I think shares look very expensive at 19 times earnings. In a market full of cheap stocks, that's a lot to pay for a company that doesn't have a big growth ramp ahead.

Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of and recommends 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

TransDigm Group Incorporated Stock Quote
TransDigm Group Incorporated
TDG
$655.50 (0.80%) $5.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
394%
 
S&P 500 Returns
127%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.