$TDG earnings report

TransDigm reported a strong fourth quarter and full fiscal 2026 on the top line. Net sales rose 23% to $2,988 million in the quarter, with organic growth of 14% as a percentage of net sales, and rose 20% to $10,557 million for the year, with organic growth of 11% and 13% excluding non-aerospace sales. Quarterly EBITDA As Defined grew 20% to $1,583 million and adjusted earnings per share grew 15% to $12.44. The CEO states that Q4 results exceeded the high end of recent guidance for revenue and EBITDA As Defined. The filing does not provide a segment or product-line revenue breakdown, so the mix of growth cannot be read from the document beyond the company's end-market assumptions.

Profitability presents a more mixed picture. Q4 GAAP net income declined 4% to $586 million from $609 million, while GAAP earnings per share rose 33% to $10.33 from $7.75. The company attributes the net income decline primarily to higher interest expense from the increase in year-over-year gross debt and higher tax expense. Interest expense, net rose to $536 million from $420 million in the quarter. The EBITDA As Defined margin was 53.0% against 54.2% a year earlier, and the company states that about two percentage points of that margin reflects dilution from recent acquisitions. For the full year, EBITDA As Defined margin was 52.7% against 53.9%, with the same acquisition dilution cited.

Capital deployment was the defining feature of the year according to the filing. The company reports approximately $4.4 billion invested in acquisitions in fiscal 2026, including Prince & Izant for approximately $1.07 billion in cash, and share repurchases of $943 million in Q4 and $2.8 billion for the year. The company also issued $3.0 billion of 6.75% Senior Secured Notes due January 2035 and used about $1.8 billion of the proceeds to repurchase part of its $2.1 billion outstanding 2028 notes. Long-term debt increased to $33,743 million from $29,167 million and cash fell to $2,279 million from $2,808 million. Total TD Group stockholders' deficit widened to $(10,000) million from $(9,686) million. Net cash provided by operating activities was $2,187 million for fiscal 2026 against $2,038 million a year earlier.

The fiscal 2027 guidance projects net sales of $11,950 million to $12,150 million, net income of $2,442 million to $2,490 million, GAAP earnings per share of $42.06 to $42.91, EBITDA As Defined of $6,195 million to $6,345 million and adjusted earnings per share of $47.09 to $47.94. The guided EBITDA As Defined margin is approximately 52.0%, which is below the fiscal 2026 level of 52.7%. The company frames guidance on commercial OEM growth in the high single-digit to low double-digit range, commercial aftermarket in the high single-digit range and defense in the high single-digit range. No prior outlook was provided with this filing, so no comparison against earlier guidance is made.

The items to examine most closely are the margin trajectory, the rise in interest expense and debt, and the translation of the guided revenue growth into EBITDA As Defined. The GAAP earnings per share comparisons are affected by the company's dividend equivalent payments, which the filing states reduced fiscal 2026 GAAP earnings per share by $1.03 and fiscal 2025 by $3.58, and which are excluded from adjusted earnings per share.

TransDigm reported a strong fiscal 2026 third quarter, with net sales increasing 23% to $2,741 million and organic sales growth representing 13% of net sales. Net income increased 10% to $540 million, while adjusted net income increased 12% to $624 million. Adjusted earnings per share increased 13% to $10.87 per share, and EBITDA As Defined increased 19% to $1,447 million.

Demand was broad-based across the company’s major market channels. Management said all three channels delivered double-digit growth versus the prior-year third quarter. Commercial aftermarket growth was 17%, commercial OEM benefited as aircraft OEMs increased build rates, and Defense delivered consistent growth while building sizable backlog. For the thirty-nine week period, net sales increased 18% to $7,569 million and organic sales growth was 10%.

Profit growth trailed sales growth, reflecting higher selling and administration expense and higher interest expense. EBITDA As Defined margin was 52.8%, compared with 54.4% in the comparable quarter a year ago. Management said that, after adjusting for acquisition dilution, its base businesses continued to expand EBITDA margins year over year. The thirty-nine week EBITDA As Defined margin was 52.6%, compared with 53.8% in the comparable prior-year period.

Capital allocation remained active. TransDigm repurchased 809,101 shares for $1.0 billion during the third quarter and repurchased 1,496,383 shares for $1.8 billion during the thirty-nine week period. The company also completed a $1.5 billion incremental debt offering, completed the Jet Parts Engineering and Victor Sierra acquisition for approximately $2.2 billion in cash, and entered an agreement after quarter-end to acquire Prince & Izant for approximately $1.07 billion in cash, including certain tax benefits.

Management raised fiscal 2026 guidance, including sales of $10,470 million to $10,550 million, EBITDA As Defined of $5,490 million to $5,550 million, and adjusted earnings per share of $40.62 to $41.46 per share. The company cited bookings exceeding expectations and continuing momentum. The outlook excludes any contribution from the pending P&I acquisition and calls for mid-teens Commercial OEM growth, low double-digit Commercial aftermarket growth, and high single-digit to low double-digit Defense growth.