Citi raises TransDigm stock price target to $1,635

Published 07/05/2025, 10:48
Citi raises TransDigm stock price target to $1,635

On Wednesday, Citi analysts showed a positive outlook on TransDigm Group Incorporated (NYSE:TDG) as they increased the company’s price target to $1,635 from the previous $1,600, while maintaining a Buy rating on the stock. The adjustment followed TransDigm’s recent financial disclosures. The company, currently valued at $78 billion, trades at a P/E ratio of 51.2x and maintains impressive gross profit margins of nearly 60%, according to InvestingPro data.

Citi’s analysis highlighted that TransDigm’s second-quarter results were consistent with market expectations, and the company has upheld its full-year guidance. The analysts noted that a shift in product mix towards original equipment (OE) could lead to a slight decline in margins in the second half of the year, particularly due to increased production at Boeing (NYSE:BA). With revenue growth of 14.8% over the last twelve months and a "GREAT" financial health score from InvestingPro, the company shows strong operational performance despite trading above its Fair Value.

Despite these changes, Citi believes that the company’s full-year guidance might be on the conservative side if the current macroeconomic conditions persist and there is no significant slowdown in aircraft cycles. They also mentioned that TransDigm’s exposure to tariffs is minimal in the short term thanks to its predominantly U.S.-based production.

The retirement of TransDigm’s CEO and the appointment of a new Co-COO, who has been with the company for approximately ten years, was also announced. According to Citi, the leadership transition appears to be well-handled, indicating stability within the company’s executive ranks.

In terms of capital allocation, the analysts observed that TransDigm continues to prioritize mergers and acquisitions. However, they also suggested that the company is likely to issue a special dividend by the end of the calendar year given the strong cash generation projections.

In other recent news, TransDigm Group Incorporated reported its Q2 2025 earnings, with an earnings per share (EPS) of $9.11, surpassing the forecasted $8.95. Despite this positive earnings surprise, the company’s revenue fell slightly below expectations, coming in at $2.15 billion compared to the anticipated $2.17 billion. The company maintained a robust free cash flow of approximately $340 million and an EBITDA margin of 54% for the quarter. TransDigm’s focus on proprietary aerospace products continues to drive its market position, although the slight revenue miss indicates potential challenges in meeting market expectations. The company projects continued growth in its commercial OEM and defense markets, with high single to low double-digit growth anticipated in the commercial aftermarket segment. TransDigm’s CEO, Kevin Stein, announced his retirement at the end of FY2025, with Mike Lisman set to take over as CEO. The company remains active in seeking mergers and acquisitions, with a focus on small to mid-sized targets that fit its strategic model. Despite the leadership transition, TransDigm maintains its long-term value creation strategy, emphasizing reinvestment in the business and disciplined capital allocation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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