# TransDigm (TDG)

Sector: Aerospace components

| Field | Value |
|---|---|
| Price | $1123.97 |
| Fair value (Analysts) | $1500.00 |
| Discount to fair value | 25.1% |
| Fair value uncertainty (Analysts) | Medium |
| Economic moat (Analysts) | Wide |
| LSEG analyst rating (1 strong buy to 5 strong sell) | 2.44 |
| Data as of | 2026-10-15 |
| Next earnings | 2026-11-04 (estimate) |

## In short

The market fears TransDigm's high and costlier debt while acquisitions dilute margins, and a strong fiscal 2027 outlook with rising margins over two to four quarters can close the gap.

## Themes and gap

- Themes: High debt (leverage), Interest rates (interest-rates), Regulation and courts (regulation-legal)
- Gap type: Can close (closable)
- Why: The fiscal 2027 outlook in November 2026 and the next quarterly margins show within about a year whether growth keeps pace with debt.

## About

TransDigm designs and makes highly engineered parts for aircraft, such as actuators and controls, pumps and valves, ignition systems, power devices, sensors, cockpit displays, seat belts and cargo systems. Its parts are on nearly all commercial and military aircraft in service. Most of its products are proprietary, and it focuses on parts that airlines and armed forces must buy again as spare parts for the life of each aircraft. In the nine months to June 27, 2026, net sales were $7.57 billion: about 42% defense, 33% commercial aftermarket and 23% commercial OEM. Its EBITDA As Defined margin was 52.6% in this period. TransDigm buys many companies with proprietary aerospace parts and raises their margins, and it funds these purchases with debt. It returns cash with share buybacks and special dividends.

## Thesis

The market prices TransDigm lower because of its high debt and the rising cost of that debt, while acquisitions dilute its margin. Total debt rose to $33.5 billion at June 27, 2026, from $30.0 billion at September 30, 2025, after new loans for acquisitions and buybacks. Net interest expense grew about 28% in the first nine months of fiscal 2026, faster than sales. The EBITDA As Defined margin fell to 52.8% in Q3 2026 from 54.4% a year earlier, because the newly bought businesses have lower margins. TransDigm also withdrew from the Stellant purchase in July 2026 because of the long regulatory review. The conflict in the Middle East softened airline capacity, although TransDigm has seen no large change in aftermarket orders. For the gap to close, three things must be true. TransDigm must reach its raised fiscal 2026 outlook of $10.47 to $10.55 billion of sales and $5.49 to $5.55 billion of EBITDA As Defined. Its fiscal 2027 outlook must show double-digit commercial aftermarket growth. The margins of Jet Parts Engineering, Victor Sierra and Prince & Izant must rise toward the group level, so that debt stays at about the same multiple of EBITDA. The first test is the fiscal Q4 report and the fiscal 2027 outlook, expected in early November 2026. If these checks pass, the gap can close over the next two to four quarters. The main risk is that a fall in air travel or higher interest rates hits a company with this much debt.

## Checkpoints

- Nov 4, 2026 (estimate): Fiscal Q4 2026 results and fiscal 2027 outlook. Status: Pending. Watch: Fiscal 2026 results within the raised outlook and a fiscal 2027 outlook with double-digit commercial aftermarket growth pass; a lower outlook or a margin below 52% fails.
- Feb 2027 (estimate): Fiscal Q1 2027 results: margins of new businesses. Status: Pending. Watch: A group EBITDA As Defined margin that rises again as the new businesses improve passes; a further fall in margin with higher interest costs fails.

## Balance sheet

- Cash: $2.8B
- Debt: $33.5B
- Net debt: $30.7B
- EBITDA, last 12 months: $5.3B
- Net debt / EBITDA: 5.8× (high)
- Interest cover: 2.3×
- Undrawn credit line: $864M
- Debt due within 12 months: $139M

TransDigm funds itself mostly with debt of its subsidiary TransDigm Inc.: secured term loans, secured notes and senior subordinated notes. No tranche of term loans or notes matures before August 2028. At June 27, 2026, total debt was $33.5 billion, including issuance costs and premium, and about 75% had a fixed rate. Cash liquidity was $3.6 billion, with $864 million available on the revolving credit facility. EBITDA is EBITDA As Defined for the 12 months to June 27, 2026, which TransDigm reports as a non-GAAP measure. Interest cover is income from operations divided by net interest expense for the nine months to June 27, 2026. Stockholders' deficit was $9.8 billion. In July 2026, TransDigm raised its receivables securitization facility to $1.0 billion until July 9, 2027. After the balance sheet date, it paid about $1.066 billion in cash for Prince & Izant, and it issued $3.0 billion of 2035 secured notes to buy back its 2028 secured notes.

As of 2026-06-27.

Sources:

- https://www.sec.gov/Archives/edgar/data/1260221/000126022126000053/tdg-20260627.htm
- https://www.sec.gov/Archives/edgar/data/1260221/000126022126000052/exhibit991tdg2026q3earning.htm
- https://www.sec.gov/Archives/edgar/data/1260221/000126022126000059/tdg-20260914.htm
- https://www.sec.gov/Archives/edgar/data/1260221/000126022126000064/exhibit991pressreleaseprin.htm

## Recent events

- 2026-09-28: TransDigm completed the purchase of Prince & Izant, a maker of brazing alloys and special metal parts for aircraft engines and other uses, for about $1.066 billion in cash from cash on hand.
- 2026-09-28: TransDigm issued $3.0 billion of 6.75% senior secured notes due 2035, up from a planned $2.5 billion. It uses the money to buy back all of its 6.75% secured notes due 2028 in a tender offer, and for general purposes.
- 2026-09-21: TransDigm's unit Extant Aerospace agreed to buy a portfolio of rotorcraft, land systems and business jet products, with a plant in California, for about $240 million in cash. It expects to close the deal in fiscal 2027.
- 2026-08-04: TransDigm reported fiscal Q3 2026 results. Net sales were $2.74 billion, up 23%, with 13% organic growth. Adjusted EPS was $10.87, up 13%. Commercial aftermarket sales grew 17%. TransDigm raised its fiscal 2026 outlook to net sales of $10.47 to $10.55 billion and adjusted EPS of $40.62 to $41.46. It bought back $1.0 billion of shares in the quarter at an average of $1,208 per share.
- 2026-07-13: TransDigm withdrew from its planned $960 million purchase of Stellant Systems. It said that the regulatory review was uncertain and would take too long compared with the time limit in the agreement.
- 2026-05-05: TransDigm reported fiscal Q2 2026 results and raised its fiscal 2026 outlook.
- 2026-04-17: TransDigm added $1.5 billion of debt: $500 million of 6.125% senior subordinated notes due 2034 and $1.0 billion of term loans due 2033. The money paid for about $800 million of share buybacks in March 2026 and for the Stellant purchase, which TransDigm later dropped.

## Risks

- High: TransDigm has about $33.5 billion of debt, more than six times its yearly EBITDA As Defined. Net interest expense was $1.47 billion in the first nine months of fiscal 2026. About 75% of the debt has a fixed rate, but new debt costs more than the debt it replaces, and higher rates reduce the cash left for acquisitions and buybacks.
- Medium: About one third of sales come from commercial spare parts, which depend on air travel. The conflict in the Middle East softened airline capacity and traffic in 2026. A recession or a long conflict can reduce flights and spare part orders.
- Medium: About 42% of sales come from defense. As a government supplier, TransDigm faces government audits and investigations. Changes in the defense budget, in procurement policy or in the timing of orders can reduce sales and prices.
- Medium: Growth depends on acquisitions. Antitrust reviews can block or delay deals, as with Stellant in July 2026, and new businesses lower the group margin until TransDigm improves them.
- Low: Stockholders' equity is negative, a deficit of $9.8 billion at June 27, 2026, because of special dividends and buybacks funded with debt. This leaves little room for error if profit falls.

## Links

- Page: https://picks.kamadorueda.com/company/TDG/
- History of changes: https://picks.kamadorueda.com/company/TDG/history/
- JSON with full history: https://picks.kamadorueda.com/data/company/TDG.json

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