Triumph Reports Strong 1Q

Zacks

Triumph Group Inc. (TGI) reported encouraging results for the first quarter of 2013 on July 26, 2012.

Earnings per share from continuing operations, excluding the integration costs of $0.5 million pre-tax ($0.01 per diluted share) and a $1.2 million pre-tax charge ($0.01 per diluted share) for early retirement incentives to certain employees increased 48% to $1.48 per diluted share during the reported quarter. Results outshone the Zacks Consensus Estimate of $1.29 per share.

However, including integration costs and early retirement incentives to certain employees, income from continuing operations was recorded at $76.3 million, or $1.46 per diluted share.

Revenue: In the reported quarter, net sales inched up 5% year over year to $887.7 million, with organic growth also reaching 5%. Revenue, however, missed the Zacks Consensus Estimate of $892 million.

Segment wise, sales from Aerostructures surged to $669.9 million from $643.3 million in the prior-year comparable quarter. Aerospace System revenue grew 5.6% year over year to $140.5 million, while Aftermarket Services increased to $80.0 million from $70.4 million in the year-ago quarter.

Margins: Operating income in the first quarter accelerated to $140.9 million compared with $105.4 million in the year-ago quarter. Operating margin increased to 15.9% in the reported quarter from 12.5% in first-quarter 2012.

EBITDA jumped 31.3% year over year to $166.9 million in the quarter while EBIDTA margin rose to 18.8% from 15.0% in the year- ago quarter.

Balance Sheet: Exiting the first quarter, Triumph’s cash and cash equivalents were approximately $32.0 million compared with $29.7 million at the end of the previous quarter. Long-term debt (net of current portion) was sequentially down at $972.2 million from $1,016.6 million in the previous quarter.

Cash Flow: Cash provided by operations, before pension contributions, was recorded at $127.6 million (including pension contribution of $25.1 million) in the three-month period ended June 30, 2012; up from $116.3 million in the year-ago period. Capital spending climbed to $37.1 million from $15.7 million in the three-month period ended June 30, 2011.

Outlook: Increased revenue across segments, operating income growth and margin expansion look impressive for the upcoming quarters. Steady backlog, stronger balance sheet and significant cash flow generation were the added perks.

Based on the above positives, the company reaffirmed the revenue guidance range of $3.5 to $3.7 billion for fiscal 2013. Further, management raised its full-year earnings guidance to approximately $5.65 per diluted share from continuing operations, excluding integration costs and early retirement incentives. Initially, earnings per share were projected within the range of $5.45 to $5.55, excluding integration costs.

The company faces stiff competition from its peers, such as AAR Corp. (AIR) and Goodrich Corp. (GR)                              

Triumph Group holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating (1-3 months)

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