TransDigm Cleared for Takeoff After Pentagon Closes Probe Into Pricing
A long-running investigation by the U.S. government into TransDigm Group's (NYSE: TDG) pricing of spare parts concluded with a whimper and not a smoking gun. With the probe now behind it, TransDigm looks ready to take flight.
In June 2019, Congress requested the Pentagon's Inspector General (IG) launch a detailed investigation into TransDigm's pricing of aerospace parts after lawmakers grilled company officials during a hearing. TransDigm has long been an investor favorite thanks to its ability to generate software-like margins from a parts business. Allegations of pricing gouging were made by short-sellers, attracting Congressional attention and some unwanted publicity for the company.
In truth, much of TransDigm's margin success comes from the commercial side of the business and the desire of airlines to pay a premium for hard-to-find spare parts. At the time the probe was ordered, sales to the U.S. government accounted for less than 10% of total revenue.
Source Fool.com
