TransDigm’s first quarter results for 2025 drew a negative market reaction after the company reported revenue that fell short of Wall Street’s expectations, despite demonstrating double-digit year-on-year growth. Management attributed the quarter’s performance to continued strength in commercial aftermarket and defense channels, while commercial OEM sales were flat. CEO Kevin Stein pointed out that “commercial aerospace market trends remain favorable,” but also noted lingering supply chain challenges and slower-than-anticipated recovery in commercial OEM production rates, especially at Boeing. The company’s non-GAAP margin performance remained robust, supported by higher-margin aftermarket activity.
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TransDigm (TDG) Q1 CY2025 Highlights:
- Revenue: $2.15 billion vs analyst estimates of $2.17 billion (12% year-on-year growth, 0.7% miss)
- Adjusted EPS: $9.11 vs analyst estimates of $8.95 (1.8% beat)
- Adjusted EBITDA: $1.16 billion vs analyst estimates of $1.15 billion (54% margin, 0.8% beat)
- The company reconfirmed its revenue guidance for the full year of $8.85 billion at the midpoint
- Management reiterated its full-year Adjusted EPS guidance of $36.47 at the midpoint
- EBITDA guidance for the full year is $4.69 billion at the midpoint, in line with analyst expectations
- Operating Margin: 46.1%, in line with the same quarter last year
- Organic Revenue rose 6.9% year on year (16.1% in the same quarter last year)
- Market Capitalization: $85.74 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions TransDigm’s Q1 Earnings Call
- Robert Stallard (Vertical Research): Asked about potential price increases to offset tariffs; CEO Kevin Stein replied that tariff impact is currently insignificant and not prompting pricing changes.
- Kristine Liwag (Morgan Stanley): Inquired about margin pressure in the second half; Stein and Lisman both emphasized guidance conservatism and noted a shift in mix toward lower-margin OEM sales.
- Noah Poponak (Goldman Sachs): Questioned the pace of M&A activity and pipeline quality; Stein stressed disciplined valuation and active screening of both large and small targets, preferring quality over volume of deals.
- Ken Herbert (RBC Capital Markets): Asked about potential pre-buy activity ahead of tariffs; Stein responded that no unusual ordering patterns were observed in the aftermarket channels.
- Jason Gursky (Citi): Sought perspective on changes to U.S. defense acquisition regulations; Stein stated it is too early to assess potential impacts but remains engaged with regulatory agencies.
Catalysts in Upcoming Quarters
Our analysts will be closely monitoring (1) sustained strength in commercial aftermarket and defense order books, (2) progress in OEM production rates—especially as supply chain constraints evolve, and (3) the impact of leadership transition on operational execution and capital allocation. Developments in the M&A pipeline and further clarity on tariff or regulatory changes will also be important markers.
TransDigm currently trades at $1,526, up from $1,475 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).
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