Is TransDigm Group (TDG) Poised to Beat on Earnings? - Analyst Blog


We expect aerospace and defense equipment manufacturer TransDigm Group Incorporated ( TDG ) to beat expectations when it reports fourthquarter and fiscal 2013 results on Nov 14th.

Why a Likely Positive Surprise?

Our proven model shows that TransDigm is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings ESP , which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at +50.0%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement. 

The combination of TransDigm's Zacks Rank # 2 (Buy) and +50.0% ESP makes us very confident in looking for a positive earnings beat on Nov 14th.

What is Driving the Better Than Expected Earnings?

Strategic acquisitions, strong brand image, strong revenues from proprietary products and an increased revenue outlook are expected to lead to a positive earnings surprise in the upcoming quarter.

The positive trend is seen in the trailing three of the four quarters, with average surprise of 13.5%, which was partially offset by the 11.7% negative surprise in the last reported quarter. This negative was because of the additional interest burden related to $1.4 billion of new debt raised in July to pay a $22 dividend will affect its bottom line. However, moving forward, TransDigm expects to reap positive synergies from its three recent acquisitions.

Other Stocks to Consider

TransDigm is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 3 companies:

DST Systems Inc . ( DST ), Earnings ESP of +1.54% and Zacks Rank #1 (Strong Buy)

Xylem Inc . ( XYL ), Earnings ESP of +6.12% and Zacks Rank #1 (Strong Buy)

Quanta Services Inc. ( PWR ), Earnings ESP of +2.50% and Zacks Rank #2 (Buy)

DST SYSTEMS (DST): Free Stock Analysis Report

QUANTA SERVICES (PWR): Free Stock Analysis Report

TRANSDIGM GROUP (TDG): Free Stock Analysis Report

XYLEM INC (XYL): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: DST , PWR , TDG , XYL

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