10:59 AM EDT, 09/08/2025 (MT Newswires) -- TransDigm Group's ( TDG ) limited near-term upside continues to weigh on investors' sentiments amid a continued period of uncertainty for its stock, RBC Capital Markets said in a Monday note.

Merger activity should be the greatest potential catalyst for the stock but the outlook for large M&A activity is limited to fiscal 2026, RBC analysts said.

The company's recent $5 billion debt offering to finance its special dividend is a "clear sign" that near-term larger M&A is unlikely, they added.

The commercial aftermarket for the aerospace market continues to show growth, but TransDigm's ( TDG ) recent underperformance is a cause for concern, the analysts said, adding that they think the company's potential to outperform peers is limited.

Expectations of declines in organic revenue and earnings before interest, taxes, depreciation, and amortization, along with a normalizing aftermarket, does not provide a "strong fundamental backdrop" for a material valuation re-rating, the analysts said.

The company's new CEO should continue to execute the company's playbook, but the stock is now transitioning from growth to capital allocation, "which would continue to limit a significant shift in sentiment," RBC said.

RBC downgraded the company's stock rating to sector-perform from outperform and reduced the price target to $1,385 from $1,550.

Price: 1264.17, Change: -6.88, Percent Change: -0.54