11 Best Aerospace and Defense Stocks to Buy Right Now

3. TransDigm Group Incorporated (NYSE:TDG)

Number of Hedge Fund Holders: 71

TransDigm Group Incorporated (NYSE:TDG) is a company that designs, produces, and supplies specialized parts for aircraft. These parts are essential for both commercial and military airplanes. It specializes in highly engineered components which are sold as replacement (aftermarket) parts and to Original Equipment Manufacturers (OEMs).

One of the key competitive edges of the company comes from its range of proprietary aerospace components which are mainly sold in the aftermarket. Management has shifted its focus to the aftermarket segment as it generates more margins, as a result around 90% of its net sales for fiscal 2023 came from this segment.

In addition, TransDigm Group Incorporated (NYSE:TDG) has also been concentrating on expanding its proprietary product portfolio and has taken some bold steps toward this goal. For instance, management acquired SEI Industries and CPI Electron Device Business during the current fiscal year. Both companies have a line-up of specialized products catering to the aerospace and defense sectors.

During the fiscal third quarter of 2024, the company surpassed its revenue guidance by posting $2.05 billion, up 17.3% year-over-year. Its net income was also encouraging and improved by 31% during the same time to reach $461 million. Management has also revised its full-year EBITDA guidance from $3,995 million to $4,095 million to an updated range of $4,100 million to $4,160 million. It is one of the best aerospace and defense stocks to buy right now.

Mar Vista Strategic Growth Strategy stated the following regarding TransDigm Group Incorporated (NYSE:TDG) in its Q3 2024 investor letter:

“TransDigm Group Incorporated (NYSE:TDG) reported another earnings beat-and-raise during its fiscal third quarter as it continues to benefit from a surge in global travel, surpassing pre-pandemic levels. The airlines posted no significant change in aircraft order or delivery patterns despite overcapacity issues. Both Boeing and Airbus remain in a holding pattern on producing and delivering new units due to manufacturing quality and labor issues (strike) in the case of Boeing and supply chain challenges in the case of Airbus. This plays directly into the hands of TransDigm’s most profitable business, commercial aerospace aftermarket, as load factors remain high, and take-offs and landings continue to grow beyond pre-pandemic levels. Moreover, the company announced a significant special dividend to be paid in October 2024. Even with this payment, TransDigm has over $5.5 billion of capital to execute its acquisition strategy in what should be a robust M&A market in 2025.”