TransDigm Group Incorporated
Industrials · Aerospace & Defense
Structural read: TDG is an aerospace aftermarket toll on the global installed fleet, not a cyclical OEM bet. ~80% of revenue is sole-source, ~55% segment EBITDA margins, ~75% of EBITDA from aftermarket. Commercial aftermarket re-accelerated as global ASMs cleared 2019 levels and widebody utilization normalized; defense aftermarket compounds off a multi-decade fleet of legacy platforms.
Capital allocation is the second engine - levered balance sheet (~6x net leverage typical), bolt-on M&A at mid-teens IRRs, recurring special dividends rather than buybacks.
- Sole-source proprietary mix (~80%) gives pricing power independent of OEM cycle
- Aftermarket-heavy revenue (~75% of EBITDA) decouples from $BA / $AIR build-rate volatility
- M&A engine has compounded EPS at ~20% CAGR over 15+ years with disciplined IRR hurdles
- Defense aftermarket on legacy fleets (F-16, C-130, AH-64) is sticky multi-decade revenue
- ~6x net leverage amplifies any aftermarket air-pocket; refi risk if HY spreads widen
- Special dividends are funded with debt, not FCF - sustainability tied to capital markets access
- OEM build-rate disruption ($BA 737 MAX, widebody) eventually flows through to aftermarket lag
- Multiple (~20x EBITDA) prices in continued sole-source pricing - any antitrust scrutiny on captive parts compresses it
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