TransDigm Q4 Results Beat View; Sees 2014 Profit Below Estimates

(RTTNews) - Engineered aircraft components maker TransDigm Group Inc. (TDG) on Thursday reported a loss for the fourth quarter as double-digit sales growth was more than offset by higher acquisition-related costs as well as higher interest expense due to an increase in the level of outstanding borrowings.

However, revenue and adjusted earnings per share for the quarter beat analysts' expectations. Looking ahead, the company forecast fiscal 2014 adjusted earnings below analysts' estimates.

TransDigm's net loss for the fourth quarter was $11.11 million or $0.20 per share, compared to net income of $87.87 million or $1.63 per share in the prior-year quarter. The latest quarter's earnings per share were reduced by $1.67 per share representing dividend equivalent payments of $95.1 million made during the quarter.

The higher interest expense in the latest quarter was due to an increase in outstanding borrowings to $5.7 billion from $3.6 billion, to fund the $12.85 per share dividend paid in November 2012 and the $22.00 per share dividend paid in July 2013.

The latest quarter's results also included acquisition-related costs and non-cash compensation costs of $14.4 million, net of tax, or $0.26 per share. The prior-year quarter's reflected acquisition-related and non-cash compensation costs of $5.1 million, net of tax, or $0.09 per share.

Excluding items, adjusted net income for the quarter was $99.74 million or $1.75 per share, compared to $92.96 million or $1.72 per share in the same period last year. Adjusted earnings per share for the quarter were negatively impacted by $0.10 due to a higher share count in the latest quarter.

On average, sixteen analysts polled by Thomson Reuters expected the company to report earnings of $1.71 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter rose 17 percent to $539.74 million from $462.61 million in the comparable quarter a year ago. Analysts had a consensus revenue estimate of $536.17 million for the quarter.

Organic net sales growth of 5.6 percent in the quarter was driven by an increase in commercial OEM and defense sales over the prior year. The favorable contributions from the acquisitions of Aerosonic, Arkwin and Whippany accounted for the balance of the sales increase.

For fiscal 2013, TransDigm's net income declined to $131.55 million or $2.39 per share from $321.67 million or $5.97 per share in the prior year. However, adjusted net income for the year was $380.14 million or $6.90 per share, compared to $359.66 million or $6.67 per share in the previous year. Net sales increased 13 percent to $1.92 billion from $1.70 billion last year.

Street expected the company to earn $6.85 per share for the year on revenues of $1.92 billion.

Looking ahead to fiscal 2014, TransDigm expects net income in a range of $372 million to $390 million or $6.16 to $6.48 per share, adjusted earnings of $7.00 to $7.32 per share, and net sales of $2.155 billion to $2.215 billion. Analysts expect the company to report earnings of $7.40 per share for the year on revenues of $2.17 billion.

Nicholas Howley, Chairman and Chief Executive Officer of TransDigm Group said, "The commercial aftermarket appears to be recovering. However, both the rate of recovery as well as the status of defense funding is still unclear…..With that in mind, our fiscal 2014 guidance assumes that our commercial OEM and aftermarket revenues will both be up in the high single-digit percentage range and revenues from the defense market will be flat."

TDG closed Wednesday's trading at $149.15, up $1.41 on a volume of 320,400 shares.