What TransDigm Earnings Say About a Booming Aerospace Sector

Coming into Wednesday trading, TransDigm stock was up 2% so far this year. (Dreamstime)

Key Points

• TransDigm reported fiscal fourth-quarter adjusted EPS of $10.82, a 10% increase year over year, on sales of $2.4 billion, up 12% year over year.
• For fiscal year 2026, TransDigm projects sales between $9.8 billion and $10 billion, implying about 12% growth, but expects essentially no earnings growth.
• Analysts’ 2026 EPS projections are $40.65, significantly higher than TransDigm’s guidance range of $36.49 to $38.53.

Aerospace has been one of the strongest performing industrial subsectors in recent months. With stock prices up, the stakes for earnings and guidance are higher than ever.

TransDigm’s early look into 2026 has some good and bad news for investors. Sales growth should continue, but the company’s earnings growth might be a problem.

The aerospace parts supplier reported fiscal fourth-quarter adjusted earnings per share of $10.82 on Wednesday, up 10% year over year. That was from sales of $2.4 billion, up 12% year over year.

Wall Street was looking for EPS of $10.08 and sales of $2.4 billion.

While the quarter looked fine, guidance was an issue. For fiscal 2026, TransDigm expects sales of $9.8 billion to $10 billion and earnings per share of $36.49 to $38.53.

That implies sales growth of about 12%, but essentially no earnings growth compared with fiscal year 2025. That’s a surprise.

Analysts’ sales projections are close to company guidance, but 2026 EPS projections are $40.65, according to FactSet.

“Good quarter, soft guidance,” wrote Vertical Research Partners analyst Rob Stallard in a Wednesday report. “We would note that TransDigm has a good track record of starting the year with conservative guidance and then beating it, e.g., initial Fiscal Year 2025 EPS guide $36.32, [and] eventual EPS of $37.33. Nevertheless, this current equity market is hardly forgiving, so we could see the stock under pressure today.”

He rates the shares at Buy and has a $1,550 price target for the stock.

Stallard was right, initially, but shares turned around. TransDigm stock traded as low as $1,279.13 but closed at $1308.81, up 1.1%, while the S&P 500 and Dow Jones Industrial Average added 0.1% and 0.7%, respectively.

Starting points help explain the reaction. TransDigm hasn’t had the year that some aerospace stocks have had.

Coming into Wednesday trading, TransDigm stock was up 2% so far this year. That belies the strength in the sector.

Shares of suppliers GE Aerospace , Parker-Hannifin , Howmet Aerospace , and Woodward were up an average of 68%. Those four trade for an average of 38 times estimated 2026 earnings. TransDigm trades for about 28 times.

Shares also had a hiccup after the company reporter weaker-than-expected fiscal third-quarter EPS. The stock fell 12% on Aug. 5.

Despite TransDigm’s recent woes, the overall outlook is sound. Commercial original-equipment sales should rise “in the high single-digit to mid-teens percentage range,” commercial aftermarket sales should rise “in the high single-digit percentage range,” and defense sales should grow “the mid single-digit to high single-digit percentage range,” the company said.

That’s a decent setup for the new year. That sales growth just has to be translated into solid earnings growth.

Along with earnings, TransDigm declared a $90 special dividend. The company likes to use special dividends to return capital to shareholders.

Write to Al Root at allen.root@dowjones.com