KeyBanc Capital Markets Analyst Michael Ciarmoli says one of his top stock picks is TransDigm Group Incorporated (TDG). He has an “overweight” rating on the stock and a $260 price target.
“It is probably one of the commercial aerospace aftermarket bellwethers, very unique private equity-driven model with disproportionately large EBITDA exposure to the aftermarket,” Ciarmoli says. “We think this name is sitting in the sweet spot of a still-attractive end market, which is the commercial aerospace aftermarket.”
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TransDigm is one of the best “allocators of capital” in the sector, Ciarmoli says. The company has recently deployed $1.3 billion to make three acquisitions, which Ciarmoli believes sets the stage for an incremental $1.75 of earnings next year.
“It’s a name that always trades at a premium, but given management’s track record, their ability to create value from acquired entities and proven operating model, we have confidence that estimates will continue to move higher, which is why this stock is one of our top picks right now,” Ciarmoli says.
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