3. TransDigm Group Inc. (NYSE:TDG)
Share Price as of August 30: $1,364.37
Number of Hedge Fund Holders: 86
TransDigm Group Inc. (NYSE:TDG) is an aerospace manufacturing company that develops and manufactures engineered aerospace components and subsystems. It specializes in engineered products critical for the safety and performance of commercial and military aircraft.
Despite ongoing OEM (Original Equipment Manufacturer) production challenges and production rates below pre-pandemic levels, revenue and bookings grew strongly in the recovering aerospace market.
In the commercial OEM sector, revenue rose about 23% in FQ3 compared to the previous year. While supply chain and labor challenges persist, the company estimated a monthly build rate of about 25 aircraft by the end of this quarter.
For the commercial aftermarket, revenue increased by approximately 11%. The passenger submarket grew 16% due to repair sales, the interior submarket grew 8%, and the business jet submarket saw a 10% increase, reversing previous declines. Conversely, the freight submarket declined 8% due to the return of belly capacity.
In the defense market, revenue grew about 13%, with both OEM and aftermarket components contributing.
These factors helped record total revenue of $2.05 billion this quarter, with an improvement of 17.32% year-over-year. The earnings per share remained at $9.00.
The company faced a surge in share price by 51.14% in 1 year. This increase indicates the need for a stock split, despite the company having no history of a stock split previously.
It is actively seeking M&A (merger and acquisition) opportunities and is confident in finding suitable targets despite market challenges. Its capital allocation prioritizes business reinvestment, accretive M&A, and shareholder returns, with less focus on debt paydown for now.
The company recently acquired Raptor Scientific, investing over $2.2 billion in the past 3 months. This acquisition is projected to add $125 million to fiscal full year 2024.
The company has recently acquired SEI and the CPI Electron Device Business, which are progressing well under Patrick Murphy’s leadership. Revenue guidance increased to approximately 20%. Overall, the company is satisfied with its fiscal third-quarter performance and expects continued growth as it maintains its operational strategy and services robust demand.
As of June 30, 86 hedge funds hold long positions in the company, with the highest stake at $1,398,855,189 by Matrix Capital Management.
ClearBridge Global Growth Strategy stated the following regarding TransDigm Group Incorporated (NYSE:TDG) in its first quarter 2024 investor letter:
“U.S. aircraft parts manufacturer TransDigm Group Incorporated (NYSE:TDG) was our largest addition. TransDigm is a steady compounder with strong pricing power coming from regulatory barriers that limit the number of competitors and due to its proprietary intellectual property, which makes it a sole supplier of many certified aircraft parts. We believe the company will see long-term duration of growth ahead as it benefits from the expansion of the aerospace aftermarket and acquisitions in this still-fragmented space.”
