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Higher sales, tax benefit boost TransDigm earnings

TransDigm Group Inc. posted higher net income in its first quarter of fiscal year 2018 on increased sales and a provisional net tax benefit of $147.1 million.

The supplier of aircraft components reported net income of $258.6 million, or $4.65 per share, in its first quarter of fiscal year 2018, up from $22.9 million, or 41 cents per share, in the year-ago quarter, and well above S&P Capital IQ's consensus GAAP EPS estimate of $2.19.

Net income from continuing operations increased to $312.0 million, or $4.60 per share, from $118.9 million, or 41 cents per share.

The company attributed the increase in net income to a 4.2% year-over-year increase in net sales to $848.0 million from $814.0 million and lower refinancing and acquisition-related costs, along with the tax benefit.

TransDigm said the net tax benefit includes a $23.1 million charge on deemed repatriated earnings of non-U.S. subsidiaries that was offset by a $170.2 million benefit for the re-evaluation of the company's net U.S. deferred tax balance.

"The commercial aftermarket revenues were particularly encouraging with our commercial transport aftermarket revenues up low double-digit percent, offset slightly by lower growth in the business jet and helicopter aftermarket," Chairman and CEO W. Nicholas Howley said.

The company reported adjusted EPS of $5.58, up from $2.52 in the year-ago quarter. Excluding the $2.96-per-share impact of tax changes, adjusted EPS was $2.62 for the quarter, below the S&P Capital IQ consensus normalized EPS estimate of $2.80.

TransDigm raised its net income and EPS guidance for fiscal year 2018 to reflect the impact of the tax law. It expects net income from continuing operations to be in the range of $906 million to $942 million, up from the previous guidance range of $702 million to $738 million. EPS from continuing operations is expected to be between $15.29 and $15.93, compared with the prior guidance of $11.61 to $12.25.

Adjusted EPS is projected to be in the range of $16.95 to $17.59, up from the previous guidance of $12.78 to $13.42.