TransDigm Group (TDG) to Report Q3 Earnings: What's in Store?

Transdigm Group Incorporated TDG is set to report third-quarter fiscal 2020 results on Aug 4, before market open.

In the last reported quarter, the company delivered a positive earnings surprise of 33.16%. Moreover, it surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an earnings surprise of 16.69% on average.

Let’s see how things have shaped up prior to this announcement.

Factors at Play

Revenue passenger miles (RPM),  which has been historically a key growth factor boosting Transdigm’s commercial aftermarket sales, witnessed a sharp decline during the April-June quarter, courtesy of the novel coronavirus outbreak worldwide. Notably, inthe last three weeks of the fiscal second-quarter, the company witnessed weak OEM sales owing to the COVID-19 pandemic.

Transdigm Group Incorporated Price and EPS Surprise

Transdigm Group Incorporated Price and EPS Surprise

Transdigm Group Incorporated price-eps-surprise | Transdigm Group Incorporated Quote

Considering the fact that the impact of the pandemic further intensified during the fiscal third quarter, we remain skeptical about how the company’s top line performance might have been.

The Zacks Consensus Estimate for fiscal third-quarter revenues is pegged at $1.01billion, indicating a deterioration of 39.3% from third-quarter fiscal 2019.

An expected fall in demand for commercial OEM products, due to reductions in OEM production rates and airlines deferring or canceling new prolonged grounding of Boeing’s BA 737 MAX and subsequent production rate cuts might have had a moderate impact on the to-be-reported quarter’s results.

This along with the dismal sales projections might have weighed on the company’s fiscal third-quarter earnings.

The Zacks Consensus Estimate stands at 99 cents per share, implying a huge plunge of 80% from the year-ago quarter’s reported figure.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Transdigm Group in the fiscal third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But this is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter..

Transdigm Group has an Earnings ESP of -6.88% and a Zacks Rank #4 (Sell).

A Stock to Consider

Here is a defense company you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Leidos Holdings, Inc. LDOS has an Earnings ESP of +0.11% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

A Recent Defense Release

Lockheed Martin LMT reported second-quarter 2020 adjusted earnings of $6.13 per share, which surpassed the Zacks Consensus Estimate of $5.71 by 7.4%.

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

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