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Biggest winners from the Q2 earnings season

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With the second-quarter earnings season in its final stretch, some clear winners and losers have emerged. For Q2 2019, about 90% of the companies in the S&P 500 reported their actual results and 75% of them have a positive EPS surprise and 57% have reported a positive revenue surprise. The forward 12-month P/E ratio for the S&P 500 is 16.7, which is above the 5-year average (16.5) and above the 10-year average (14.8).

In general, companies are reporting earnings that are 5.7% above the estimates, which is also above the 5-year average. In terms of sales, the percentage of companies (57%) reporting actual sales above estimates is below the 5-year average. In aggregate, companies are reporting sales that are 0.8% above estimates.

The three best-performing stocks since the season began around July 19 are Twitter, Northrop Grumman, and TransDigm. All of them beat Wall Street expectations and their stocks performed strongly during the last turbulent weeks.

At the end of July, the social media Twitter reported earnings that beat analyst estimates on the top and bottom lines, as well as the strong user and advertising revenue growth for the quarter. Since then its stocks gained almost 9%. A few days later, the global security company Northrop Grumman came out with quarterly earnings of 5.06 USD per share, beating the analysts estimates of 4.64 USD per share. Since reporting the earnings results, the stocks of the company gained almost 15%.

Last week, the aerospace components developer TransDigm reported adjusted earnings per share of 4.95 USD, up by 23.4% from 4.01 USD. Its stocks gained more than 18% since then.

All the three companies have strong performance on the global markets and were not much affected by the geopolitical crisis and Sino-American trade war. However, the rhetorics from the last week seriously affected the global stock markets. Tariffs remain the main obstacle to the business and hurt the guidance in most of the earnings statements.

TransDigm Group reported strong financial results in Q2 2019

TransDigm Group Incorporated, a leading global designer, producer and supplier of highly engineered aircraft components, reported results for the third quarter ended June 29, 2019. The company had net sales of 1.658 billion USD, which represents an increase of 69.1% YoY. The net income from continuing operations amounted to 144.5 million USD, while EBITDA rose by 10% to 518.1 million USD.

Prior to the current quarter, on March 14, 2019, TransDigm completed the acquisition of Esterline Technologies Corporation (ESL), a supplier of products to the global aerospace and defense industry in a transaction valued at approximately 4 billion USD in total consideration.

Also prior to the current quarter, on February 13, 2019, TransDigm completed the private offering of 4.0 billion USD aggregate principal amount of 6.25% Senior Secured Notes due 2026. The net proceeds of the 4.0 billion USD secured notes were used to fund the purchase price of the Esterline acquisition and to allow for substantial near term financial flexibility. The acquisition of Esterline and the associated financing described above significantly impacted certain year-over-year comparisons.

Acquisition sales contributed 561.4 million USD, of which 545.3 million USD were from Esterline.

Meanwhile, the net sales for the thirty-nine week period ended June 29, 2019 rose 39.3%, or 1.08 billion USD, to 3.85 billion USD. Acquisition sales contributed 768.6 million USD, of which 667.3 million USD were from Esterline.