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TransDigm: Flying High, So is Leverage

Earnings Note: 06 Nov 2018, 10:13 PM ET - The story at TDG remains the same but the pace of shareholder rewards may be paused until its recent $4bn acquisition of Esterline is closed.  Early guidance points to another year of revenue and EBITDA growth and margin expansion in FY19.

TransDigm: Acquisitions as Protection?

HY Note: 10 Oct 2018, 3:45 PM ET - Even for TDG, the latest acquisition is a major transaction, but for bondholders it beats excessive reliance on special dividends.  Theories on the screen include a desire to fend off Boeing incursions and sustain growth and pricing power. 

TransDigm: Cash Pile Not for Long

Earnings Note: 07 Aug 2018, 7:56 PM ET - TDG sings the same story with no notable changes in underlying business fundamentals. Takeaway from 3Q18 was an elevated cash pile of $1.9 bn which will likely be returned to shareholders absent any M&A in the next 60 days.

TransDigm: Tapping the Debt Markets

Earnings Note: 01 May 2018, 5:43 PM ET - TDG is looking to tap the loan and bond markets for $1.2 bn in new money and will reprice existing term loans.  TDG has the same story line operationally with an M&A focus supported by strong free cash flow and a stable credit profile. 

TransDigm: Management Changes/Strategy Same

Worth Watching: 30 Apr 2018, 6:36 PM ET - TransDigm announced that Kevin Stein, President of the company has been named CEO and President, while Nick Howley, previous CEO/Chairman/Founder will become Executive Chairman.  This transition has long been anticipated by the analyst communit ..

US Strategy: Tariffs as Repricing Event?

Strategy Analysis: 01 Mar 2018, 9:40 PM ET - The market has been building in very low odds of a trade war event, a NAFTA withdrawal, or a significant escalation of tit-for-tat trade retaliations on a broader scale.  The odds-makers just got a fresh load of input.

Section 232: The NAFTA Conundrum

Sector Analysis: 26 Feb 2018, 3:42 AM ET - Using Section 232 on Steel/Aluminum could damage supplier chains and cost structures and drive broader inflation.  A tariff gambit in such key industries could undermine the NAFTA negotiations and have immediate effects on risk pricing. 

TransDigm: Same Song, Same Plan

Earnings Note: 06 Feb 2018, 8:28 PM ET - TDG's financial risk profile doesn't vary much over time by design with a capital structure literally geared to more M&A. Financial flexibility and high free cash flow makes for safe, stable bonds even in more volatile markets.

TransDigm: Growth Gut Check

Earnings Note: 09 Nov 2017, 8:29 PM ET - TDG saw the stock market backpedal on fear of growth sustainability.  Investor fears of oversight (pricing practices, antitrust) and organic growth questions will remain an issue, but massive free cash flow helps ease credit angst.

TransDigm: The 30% Solution

HY Note: 05 Nov 2017, 9:24 PM ET - TDG offers a microcosm of the tax bill's interest deductibility challenge. For TDG, it is a minor factor given the statutory rate declines for such a high earner. The M&A math may change, but the TDG drill remains the same.

A&D 3Q17 Earnings Recap: LMT, GD, BA, NOC, RTN, LLL

Sector Analysis: 30 Oct 2017, 11:36 PM ET - Six names under our A&D coverage reported third quarter earnings last week. Results were generally healthy with four of them reporting better than expected earnings and all six raised or affirmed full-year 2017 earnings guidance. 

TransDigm: All About the Cash Flow

Earnings Note: 09 May 2017, 8:23 PM ET - The short seller's hope for an investigation remains a long shot negative as TDG keeps minting free cash flow across a highly diverse product mix and a far ranging commercial customer base. 2Q17 numbers keep it going.

US IG Sector Recs: A Very "In Line" April

Sector Weightings: 09 May 2017, 5:22 AM ET - After a weak March the IG index returned to positive territory, but most sectors reported excess return within +/- 5bp of the overall index. We discuss performance and update our sector recommendations. 

US IG Sector Slide Pack: April 2017

Sector Weightings: 08 May 2017, 11:18 PM ET - Our US IG Sector Slide Pack: April 2017 includes spread, return and attribution data for many of the Level 3 and Level 4 sectors of the BAML Index.  We look at both monthly and year-to-date performance. 

Sector Update March 2017 - US Industrials

Sector Weightings: 10 Apr 2017, 8:20 PM ET - The Industrials sector largely matched the widening seen in the IG Corp ate index, though significantly underperformed on an excess return basis. We continue to hold a largely negative view on the sector entering 2Q17.

TransDigm: Not a Good Time for Silence

HY Note: 22 Mar 2017, 5:15 PM ET - With a new Congressman looking to establish a reputation and the shorts firing for effect, this is not a good time for TDG to be radio silent. Feeding the markets some logical inputs could help slow the assumption spinning.

TransDigm: Shorts Score with Washington

HY Note: 21 Mar 2017, 6:20 PM ET - The shorts reel in a Democratic Congressman to push the price gouging inquiry. Now the onus is on TDG to have a good explanation of where the line is between sloppy admin work and not owning up to sole supplier status.  

Sector Update February 2017 - US Industrials

Sector Weightings: 12 Mar 2017, 8:10 PM ET - February was a mixed month for Industrials sub-sectors, however aggregate excess return slightly outperformed the IG index. We also provide a summary of Industrials monthly IG supply and US Manufacturing ISM in our report.

Trump, Trade, Germany, and the EU

Strategy Analysis: 08 Mar 2017, 11:15 PM ET - The Trump team focuses on a bilateral deal with Germany distinct from the EU and sets the stage for more tension. We frame the US-Germany trade deficit for 2016 at the industry level.  Trade edges ahead of the Fed as a risk variable?

US Taxes: Interest Deductibility, Par Call Fear

Sector Analysis: 27 Feb 2017, 3:42 PM ET - We look into recent inquiries on interest deductibility issues and redemption risk.  Finding special tax redemption provisions can be a needles-and-haystacks exercise. The good news is "tailored" interest deduction language is hard to find.

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