TransDigm downgraded to Equal Weight at Wells Fargo (NYSE:TDG)

TransDigm Group (NYSE:TDG) on Monday was downgraded to an Equal Weight funding score from Chubby by analysts at Wells Fargo Securities. They mentioned the maker of airplane components faces softening demand and better prices that may restrict its potential to make acquisitions.

“TransDigm (TDG) has traditionally been extremely acquisitive, and prior offers have pushed inventory efficiency effectively above different aerospace firms,” Matthew Akers, analyst at Wells Fargo, mentioned within the Nov. 28 report. “Given the corporate’s rising scale, it might be tougher for TransDigm (TDG) to seek out targets.”

TransDigm’s (TDG) extremely worthwhile aftermarket enterprise, which makes cash from repairing and overhauling plane, is prone to gradual from 43% progress this yr to pre-pandemic ranges, in line with Wells Fargo. This yr’s surge in exercise is like previous cycles when airways jumpstarted their upkeep after placing it on maintain throughout a disaster.

The corporate additionally faces larger borrowing prices because it refinances debt that matures within the subsequent few years. The Federal Reserve this yr has raised rates of interest in an effort to lift the worth of the U.S. greenback as inflation hovers close to 40-year highs.

“Consensus forecasts curiosity expense coming down after FY23, which we expect is unlikely as TransDigm (TDG) has indicated paying down debt is a low precedence,” the report mentioned.