Triumph Group Acquires Primus

Zacks

Triumph Group, Inc. (TGI) took over Primus Composites from Precision Castparts Corp. (PCP) for an undisclosed amount. This move comes as a part of the company’s strategy to widen its global footprint and expand its structural composite potential.

Primus Composites is a global supplier of composite and metallic propulsion and structural composite components and assemblies. Its main customers include Airbus SAS, Rolls Royce, Aircelle and Bombardier Inc.

Triumph Group will acquire two manufacturing facilities, one in Farnborough, England and another in Rayong, Thailand. Post-acquisition, these businesses will become a part of Triumph Aerostructures Systems Group and will operate as Triumph Structures-Farnborough and Triumph Structures-Thailand.

Triumph Aerostructures Systems Group is engaged in designing, manufacturing, assembling and integration of metallic and composite aerostructures and structural components. The business contributed 73% to net sales in fiscal 2013. The company expects this acquisition to add approximately $55 million to the top line and be accretive to the bottom line immediately.

Based in Berwyn, Pa. Triumph Group designs, engineers, manufactures, repairs and overhauls a broad portfolio of aerostructures, aircraft components, accessories, subassemblies and systems.

Triumph’s organic growth has been reasonably strong based on the addition of products and services, expansion of operating capacity and marketing of a complete product portfolio. Currently, the company seems to be busy acquiring and adding to its portfolio.

Only last month, the company completed the acquisition of the pump and engine control systems business of Goodrich Corporation from United Technologies Corp. (UTX).

Recently, Triumph Group reported fourth quarter fiscal 2013 results that ended Mar 31, 2013. Fourth quarter earnings surpassed the Zacks Consensus Estimate and also increased year over year.

Going forward, a rebounding aviation industry will spur demand for efficient jets. Triumph Group with its fuel and technologically efficient jets will stand to gain from these favorable macro dynamics.

However, we remain concerned about the uncertainty related to defense budgets as the demand for Triumph’s military and defense products is largely dependent on government budgets. Moreover, in the current scenario, where energy prices as well as commodity prices increase daily on an average, the company may find it more challenging to maintain and increase margins further. The company presently retains a short-term Zacks Rank #3 (Hold).

In the near term, we would advise investors to accumulate its short-term Zacks Rank #2 (Buy) peer B/E Aerospace Inc. (BEAV).

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