TransDigm’s third quarter was marked by robust growth in both its commercial aftermarket and defense channels, with management attributing performance to steady demand recovery and effective execution of its proprietary product strategy. CEO Michael J. Lisman highlighted that commercial OEM revenues rebounded after prior inventory adjustments, while defense revenues benefited from new contract wins across domestic and international markets. The company underscored the role of high-margin aftermarket sales and its focus on value-driven operations, with Co-COO Joel Reiss noting that all submarkets within commercial aftermarket experienced positive trends and that the company’s automation initiatives are helping to drive productivity gains.
Is now the time to buy TDG? Find out in our full research report (it’s free for active Edge members).
TransDigm (TDG) Q3 CY2025 Highlights:
- Revenue: $2.44 billion vs analyst estimates of $2.4 billion (11.5% year-on-year growth, 1.6% beat)
- Adjusted EPS: $10.82 vs analyst estimates of $10.05 (7.6% beat)
- Adjusted EBITDA: $1.32 billion vs analyst estimates of $1.29 billion (54.2% margin, 2.3% beat)
- Adjusted EPS guidance for the upcoming financial year 2026 is $37.51 at the midpoint, missing analyst estimates by 6.1%
- EBITDA guidance for the upcoming financial year 2026 is $5.15 billion at the midpoint, below analyst estimates of $5.27 billion
- Operating Margin: 47.6%, up from 43.2% in the same quarter last year
- Organic Revenue rose 10.7% year on year vs analyst estimates of 8.7% growth (193.7 basis point beat)
- Market Capitalization: $76.09 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 Q3 Earnings Call
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Scott Mikus (Melius Research) asked if management would consider expanding M&A beyond aerospace and defense. CEO Michael J. Lisman replied that current efforts remain focused on core markets, though future diversification is possible.
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Robert Stallard (Vertical Research) questioned the conservative defense growth guidance for the coming year. Management explained that defense bookings are unpredictable and projections reflect this variability, despite strong recent contract wins.
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Ken Herbert (RBCCM) inquired about the timeline for raising acquired company margins to TransDigm’s standards. Lisman and CFO Sarah L. Wynne confirmed that while margin improvement is expected, it will take time and depends on operational integration.
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Myles Walton (Wolfe Research) requested clarity on capital expenditures and headcount trends. Co-COO Joel Reiss explained that automation projects are aimed at both capacity and productivity, allowing the company to handle growth with minimal headcount increases.
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Kristine Liwag (Morgan Stanley) sought details on the F-47 program’s contribution and overall defense contract wins. Management noted a strong pipeline of new business but declined to share specifics, citing competitive reasons.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will monitor (1) the pace of margin improvement as recent acquisitions are integrated, (2) the impact of ongoing automation investments on productivity and cost control, and (3) sustained momentum in aftermarket and defense contract bookings. Additionally, updates on OEM production rates and the progress of automation-driven headcount management will be important indicators of execution.
TransDigm currently trades at $1,352, up from $1,294 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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