Why Is TransDigm (TDG) Down 0.6% Since Last Earnings Report?

Core Viewpoint - TransDigm Group's recent earnings report shows strong performance with adjusted earnings surpassing estimates, but the stock has underperformed compared to the S&P 500, raising questions about future trends leading up to the next earnings release [1][2]. Financial Performance - For Q4 fiscal 2025, TransDigm reported adjusted earnings of $10.82 per share, exceeding the Zacks Consensus Estimate of $10.25 by 5.6% and improving 10.1% from $9.83 in the prior year [3][4]. - The company achieved net sales of $2.44 billion, an increase of 11.5% from $2.19 billion year-over-year, also surpassing the Zacks Consensus Estimate of $2.41 billion by 1.3% [5]. - Organic sales grew by 10.8%, contributing to total net sales of $8.83 billion for fiscal 2025, up from $7.94 billion the previous year [6]. Profitability Metrics - Gross profit for Q4 was $1.47 billion, reflecting a 16.9% increase from $1.26 billion in the same quarter last year [7]. - Net income rose 30.1% year-over-year to $609 million [8]. Financial Position - As of September 30, 2025, cash and cash equivalents were $2.81 billion, down from $6.26 billion a year earlier, while long-term debt increased to $29.17 billion from $24.30 billion [9]. - Cash from operating activities was $2.04 billion, slightly down from $2.05 billion at the end of Q4 fiscal 2025 [9]. Future Guidance - For fiscal 2026, TransDigm expects sales between $9.75 billion and $9.95 billion, aligning with the lower end of the Zacks Consensus Estimate of $9.75 billion [10]. - The company anticipates adjusted earnings in the range of $36.49 to $38.53 per share, while the Zacks Consensus Estimate stands at $40.20, which is above the company's guidance [11]. Market Sentiment - Recent estimates for TransDigm have trended downward, with a consensus estimate shift of -9.01% over the past month [12]. - The company currently holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return in the coming months [14]. Industry Comparison - TransDigm is part of the Aerospace - Defense Equipment industry, where competitor Curtiss-Wright has seen a 4.2% gain over the past month, reporting revenues of $869.17 million, an 8.8% year-over-year increase [15]. - Curtiss-Wright's expected earnings for the current quarter are $3.64 per share, reflecting an 11.3% increase from the previous year, and it holds a Zacks Rank 2 (Buy) [16].