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Triumph Group (TGI) Up 9.8% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Triumph Group (TGI). Shares have added about 9.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Triumph Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Triumph Group's Q2 Earnings & Sales Beat Estimates

Triumph Group’s adjusted earnings in second-quarter fiscal 2020 (ended Sep 30, 2019) were 64 cents per share, which surpassed the Zacks Consensus Estimate of 61 cents by 4.9%. The bottom line improved 60% from 40 cents recorded in the prior-year quarter.

The company generated GAAP earnings of 85 cents per share in the second quarter against a loss of 30 cents incurred in the year-ago quarter.

Total Sales

Net sales in the quarter under review came in at $772.1 million, outpacing the Zacks Consensus Estimate of $705 million by 9.5%. However, the top line declined 9.7% on a year-over-year basis.

After taking divestitures into account, organic sales in the quarter were up 12.8% year over year on increased volumes on engine and military rotorcraft components, aftermarket accessory services, continuing structures programs and new engineering services.

Operational Highlights

In second-quarter fiscal 2020, the company generated adjusted operating income of $59.1 million with adjusted operating margin of 8%.

Interest expenses and other amounted to $35.4 million, up 23.3% from $28.7 million in the prior-year quarter.

Backlog, excluding the effect of divestitures, was flat at $3.7 billion year over year.

Segmental Performance

Aerospace Structures: Segment sales totaled $422.6 million, down 20% from $528.4 million in the year-ago quarter. Operating income was $13.6 million, reflecting a significant improvement from operating loss of $22.6 million incurred in the same quarter last year.

Integrated Systems: Segment sales rose 9.7% year over year to $286 million. Operating income summed $51.5 million, up 29.1% from the year-ago level of $39.9 million.

Product Support: Segment sales declined 6.6% year over year to $67.4 million in the reported quarter. Operating income amounted to $10.9 million, down 5.2% from the year-ago figure of $11.5 million.

Financial Position

As of Sep 30, 2019, Triumph Group’s cash and cash equivalents totaled $24.8 million, compared with $92.8 million as of Mar 31, 2019.

Its long-term debt (excluding current portion) amounted to $1.46 billion as of Sep 30, 2019, compared with $1.48 billion as on Mar 31, 2019.

Net cash used in operating activities in the first six months of fiscal 2020 was $10.6 million, compared with $197.2 million a year ago.

The company’s capital expenditures totaled $17 million in the first six months of fiscal 2020, compared with $24.2 million in the prior-year quarter.

Guidance

Triumph Group reaffirmed its fiscal 2020 guidance. Based on aircraft production rates anticipated by the company along with the impact of pending program transfers, Triumph Group continues to project revenues in the $2.8-$2.9 billion range. The Zacks Consensus Estimate for the same is pegged at $2.85 billion, at the mid-point of the company’s projected view.

For fiscal 2020, the company maintains the adjusted earnings per share projection at the $2.35-$2.95 band. The Zacks Consensus Estimate for the metric is pinned at $2.54, around 9 cents below the mid-point of the company’s guided range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Triumph Group has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Triumph Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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