What Happened?
Shares of aerospace and defense company TransDigm (NYSE: TDG) fell 4.4% in the afternoon session after Morgan Stanley lowered its price target on the aircraft component maker to $1,600 from $1,750, citing higher debt. The bank adjusted its fiscal year 2025 earnings per share forecast for TransDigm downward due to increased interest expenses. This revision came after the company undertook recent debt transactions and paid out a special dividend of $90 per share. Despite the lower price target, Morgan Stanley maintained its "Overweight" rating on the stock. The new target still suggested a potential 21.9% upside from the stock's last closing price.
The shares closed the day at $1,239, down 5.6% from previous close.
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What Is The Market Telling Us
TransDigm’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 2 months ago when the stock dropped 12.5% on the news that the company reported third-quarter financial results that fell short of analyst expectations for both revenue and earnings. The aircraft components manufacturer posted revenue of $2.24 billion and adjusted earnings per share of $9.60, both of which missed Wall Street estimates.
TransDigm explained the shortfall resulted from its commercial Original Equipment Manufacturer (OEM) market, where companies build parts for other manufacturers' final products. The company cited lower-than-expected aircraft production rates and customers who reduced their parts inventories, a practice called destocking. Compounding the issue, TransDigm also trimmed its full-year sales guidance, which signaled potential challenges ahead.
TransDigm is down 1.3% since the beginning of the year, and at $1,238 per share, it is trading 23.6% below its 52-week high of $1,621 from July 2025. Investors who bought $1,000 worth of TransDigm’s shares 5 years ago would now be looking at an investment worth $2,519.
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