Core Insights - The global backlog of unfilled aircraft orders exceeds 17,000 jets, with Boeing facing production delays that extend delivery timelines, resulting in an average fleet age of 15 years [1] - GE Aerospace and TransDigm Group are two major beneficiaries of this situation, each profiting in distinct ways [1] GE Aerospace - GE Aerospace has an installed base of approximately 80,000 commercial and military engines, generating service revenue of $24 billion in 2025, a 26% increase year-over-year, which constitutes 53% of total revenue [2] - Management projects $8.2 billion in free cash flow (FCF) for 2026, with FCF conversion exceeding 100%, and maintains a clean balance sheet compared to TransDigm's higher leverage [4] - GE trades at about 43 times estimated 2026 earnings, reflecting a market expectation of flawless execution and a pure-play razor-and-blade model [5] - GE generated $7.3 billion in free cash flow in fiscal 2025, with a gross margin of 36.64% and a dividend yield of 0.43% [10][11] TransDigm Group - TransDigm specializes in manufacturing thousands of small, mission-critical components for aircraft, holding a sole-source and proprietary position for many parts, which grants significant pricing power [6] - The company reported an operating margin of 47.2% in fiscal 2025, significantly higher than GE's 21.4%, and returned $5 billion to shareholders through special dividends [7] - TransDigm's leverage is more than four times that of GE, and its pricing model has faced regulatory scrutiny [7] - TransDigm produced $1.8 billion in free cash flow, with a forward price-to-earnings (P/E) ratio of approximately 32 times [11] Investment Considerations - GE is positioned as a safer investment option, appealing to those willing to pay a premium for stability, while TransDigm attracts investors seeking higher profitability despite its debt levels [12]

Q2 FY2026 Financial Results Conference Call February 6, 2026 Nasdaq: STRT Jennifer Slater President and CEO Matthew Pauli Senior Vice President and CFO www.strattec.com Safe Harbor Statement Safe Harbor Statement Certain statements contained in this presentation contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as "anticipate," "believe," "could," "expect," "i ...

Core Viewpoint - TransDigm Group is a significant player in the aerospace sector, providing substantial returns to shareholders through special dividends, which are often overlooked compared to traditional dividend stocks [1][7]. Group 1: Business Model and Strategy - TransDigm focuses on specialized aircraft parts that are essential yet often ignored, having acquired 93 businesses since 1993 to dominate niche markets [2]. - Approximately 80% of TransDigm's sales come from parts where it is the sole supplier, and 90% of its products are proprietary, creating high switching costs for customers [3]. - The aftermarket segment generates about half of TransDigm's revenue but accounts for roughly three-quarters of total profits due to significantly higher margins compared to original equipment sales [4]. Group 2: Financial Performance - TransDigm has paid out $248.50 per share in special dividends since 2019, with the most recent payout being $90 per share, reflecting a dividend yield of approximately 6.7% at a stock price of around $1,350 [8]. - The company maintains a net debt of $27.4 billion, which is 5.8 times its EBITDA, aligning with its target leverage range of 5 to 7 times EBITDA [9]. - For fiscal 2026, management projects an 11.5% revenue growth, although EBITDA margins are expected to decline by nearly two percentage points due to recent acquisitions [12]. Group 3: Market Position and Challenges - TransDigm's stock trades at 36 times forward earnings, indicating that growth is already priced in, which may not be cheap given the company's reliance on acquisitions for growth [13]. - The company faces challenges in finding accretive M&A targets due to its $73 billion market cap and total debt of $30 billion, compounded by rising interest rates [14]. - Regulatory scrutiny remains a concern, as past investigations have highlighted issues with excessive profits on military contracts, which could impact future profitability [15]. Group 4: Investment Considerations - TransDigm's business model is considered durable, with its sole-source supplier status and aftermarket dominance providing significant pricing power [16]. - The special dividend strategy offers a unique return component that may appeal to total return investors rather than those seeking regular income [11][17].

Company Overview - STRATTEC SECURITY CORPORATION is a leading provider of smart vehicle access, security, and authorization solutions for the global automotive industry [1] - The company has over 110 years of history and has been at the forefront of innovation in vehicle security, transitioning from mechanical to integrated electro-mechanical systems [3] - STRATTEC serves a broad range of customers, including leading automotive OEMs, offering advanced security systems and power access solutions [3] Upcoming Event - The company will present and host investor meetings at the LD Micro Invitational XV in New York, NY on April 10, 2025 [1] - The presentation is scheduled to begin at 9:30 a.m. Eastern Time, with a live audio webcast available for investors [2]