TransDigm’s second quarter results were met with a significant negative market reaction as both revenue and non-GAAP profit missed Wall Street estimates. Management attributed the shortfall primarily to weaker-than-expected performance in its commercial OEM segment, which was affected by ongoing production issues at major aircraft manufacturers and inventory destocking. CEO Kevin Stein highlighted that while commercial aftermarket and defense revenues continued to grow, “OEM revenue was a limiter for our quarterly performance,” largely due to lingering effects of the Boeing strike and challenges at Airbus. Stein described the OEM headwinds as “transitory,” expressing confidence that trends would improve as production rates normalize.
Is now the time to buy TDG? Find out in our full research report (it’s free).
TransDigm (TDG) Q2 CY2025 Highlights:
- Revenue: $2.24 billion vs analyst estimates of $2.30 billion (9.3% year-on-year growth, 2.6% miss)
- Adjusted EPS: $9.60 vs analyst expectations of $9.90 (3.1% miss)
- Adjusted EBITDA: $1.22 billion vs analyst estimates of $1.23 billion (54.4% margin, 0.9% miss)
- The company dropped its revenue guidance for the full year to $8.79 billion at the midpoint from $8.85 billion, a 0.7% decrease
- Management slightly raised its full-year Adjusted EPS guidance to $36.74 at the midpoint
- EBITDA guidance for the full year is $4.73 billion at the midpoint, in line with analyst expectations
- Operating Margin: 46.4%, in line with the same quarter last year
- Organic Revenue rose 6.3% year on year vs analyst estimates of 8.5% growth (220 basis point miss)
- Market Capitalization: $79.49 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From TransDigm’s Q2 Earnings Call
- David Strauss (Barclays) asked about the moderation in aftermarket growth and whether TransDigm expects to close the gap with industry peers. Co-COO Mike Lisman explained, "We're about where we should be in terms of growth given the product mix we have," noting the company's lower engine exposure relative to peers.
- Noah Poponak (Goldman Sachs) questioned visibility into a near-term rebound in OEM revenues and the extent of customer inventory in the channel. Lisman responded that recovery is expected to be temporary but admitted, "We don't get great visibility the whole way through the channel."
- Myles Walton (Wolfe Research) inquired about sequential aftermarket trends and distributor point-of-sale growth. Lisman stated that distributor sales outpaced overall aftermarket growth and reiterated that the business remains above pre-pandemic volume levels.
- Ronald Epstein (BofA) asked about supply chain improvements and the potential impact of strikes in defense markets. Lisman acknowledged improvements in supply chain conditions but noted some ongoing challenges with castings and electronics, and said any strike impact would be smaller than prior OEM disruptions.
- Kristine Liwag (Morgan Stanley) sought updates on competition from OEM second sourcing and PMA (Parts Manufacturer Approval) alternatives. Lisman reported no material changes in competitive dynamics, emphasizing that price points and the consumable nature of many products limit PMA threats.
Catalysts in Upcoming Quarters
In the quarters ahead, our analysts will focus on (1) the pace at which OEM production normalizes and whether inventory destocking abates, (2) sustained growth and margin performance in the commercial aftermarket and defense segments, and (3) the impact of integrating new acquisitions like Servotronics and Simmonds Precision. Monitoring supply chain trends and leadership transition execution will also be important indicators of operational continuity.
TransDigm currently trades at $1,382, down from $1,609 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
Our Favorite Stocks Right Now
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
