Why Is Triumph Group (TGI) Down 5.3% Since its Last Earnings Report?

It has been about a month since the last earnings report for Triumph Group, Inc. TGI. Shares have lost about 5.3% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is TGI due for a breakout? 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 Q4 Earnings Lag, Revenues Top Estimates

Triumph Group adjusted earnings from continuing operations in fourth-quarter fiscal 2018 (ended Mar 31, 2018) came in at $1.01 per share, which missed the Zacks Consensus Estimate of $1.02 by 1%. Reported earnings also declined 67.3% from $3.09 per share a year ago.

Excluding one-time adjustments, the company reported GAAP loss of $6.04 in the first-quarter, compared to the year-ago quarter’s loss of $2.57.

Total Revenues

In the reported quarter, net sales were $896.9 million, beating the Zacks Consensus Estimate of $825 million by 8.7%. The top line, however, declined 2.5% year over year.

Organic sales in the quarter improved year over year, primarily driven by higher production deliveries on the Global Hawk/Triton, Global 7000, and G650 programs, partially offset by the completion of and production rate reductions on previously disclosed programs.

Operational Highlights

In fourth-quarter fiscal 2018, the company’s operating loss was $298.8 million, wider than the loss of $126.8 million in the year-ago quarter.

Quarterly Segment Performance

Aerospace Structures: Segment sales were $550.4 million, down 1.8% from $560.7 million in the year-ago quarter. Operating loss for the segment was $324.6 million, wider than the loss of $155.6 million in the year-ago quarter.

Integrated Systems: Segment sales dipped 2.4% year over year to $275.3 million. Operating income was $55 million, down from the year-ago level of $56 million.

Product Support: Segment sales fell 2.4% year over year to $79.1 million in the reported quarter. Operating income was $13.6 million in the fiscal fourth quarter against the year-ago quarter’s income of $12.8 million.

Financial Position

As of Mar 31, 2018, Triumph’s cash and cash equivalents were $35.8 million compared with $69.6 million as of Mar 31, 2017. As of Mar 31, 2018, long-term debt (excluding current portion) was $1.42 billion compared with $1.04 billion as of Mar 31, 2017.

Cash outflow from operations at the end of fiscal 2018 was $288.9 million, compared to cash inflow of $281.5 million at fiscal 2017-end. The company spent $42.1 million as capital expenditure in fiscal 2018, compared to $51.8 million spent in fiscal 2017.

Guidance

Based on anticipated aircraft production rates and divestitures completed in fiscal 2018, Triumph Group projects revenues for fiscal 2019 in the range of $3.3-$3.4 billion. It expects revenues to increase in fiscal 2019 as development programs enter production and sales from continuing programs and new wins offset sunsetting programs.

On the bottom-line front, the company expects to generate adjusted earnings per share in the range of $1.50-$2.10.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 32.5% due to these changes.

Triumph Group, Inc. Price and Consensus

Triumph Group, Inc. Price and Consensus | Triumph Group, Inc. Quote

VGM Scores

At this time, TGI has a subpar Growth Score of D, however its Momentum is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Our style scores indicate that the stock is more suitable for value investors than momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise TGI has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

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