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Stock Strategist

Transdigm's Business Model Remains a Success

We do expect revenue and profit growth at the aircraft part maker will moderate, however.

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 Transdigm (TDG) manufactures products for electronic, fluid, power, and motion control onboard aircraft. It also supplies products used for cabin structures, lighting, laminates, pallets, and a host of other applications. The B737, B777, B787, A320, and A330/340 aircraft account for a combined 30% of sales. In the defense business, aircraft include the A400M and C-130.

Transdigm’s business reflects its private equity roots--the company had its initial public offering in 2006--and its units typically operate autonomously. The company also uses significant financial leverage, relying on a stream of aftermarket business to generate predictable cash flows. Management is a serial acquirer, aiming to improve operations at acquired firms and optimize the capital structure.

Chris Higgins does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.