On October 31, Triumph Group Inc. (TGI) reported encouraging results for the second quarter of fiscal 2012. Second-quarter earnings per diluted share came in at $1.13, showing an improvement from 84 cents in the year-ago comparable quarter. Results also surpassed the Zacks Consensus Estimate of $1.04.
The improved result was driven by significant operating income growth and operating margin expansion generated in the Aerospace Systems segment as well as Aerostructures segment.
Revenue
In the second quarter of 2012, net sales inched up 2.9% year over year to $790.5 million. Segment wise, sales from Aerostructures surged 1.7% to $588 million from $578 million in the prior-year comparable quarter. Aerospace System revenue grew 8.1% year over year to $134 million, while Aftermarket Services increased 2.9% to $71 million from $69 million in the year-ago quarter. The segmental growth resulted from the company’s good execution in all its segments. In addition, the Aerostructures segment margins benefited from the synergies realized from the Vought acquisition.
Margins
Operating income in the second quarter accelerated to $108.5 million from $86.1 million during the prior-year quarter. Operating margin increased to 13.7% from 11.2% in second-quarter 2011.
In the second quarter of fiscal 2012, EBITDA increased 27.6% to $132.2 million year over year. EBIDTA margin rose to 16.7% compared with 13.5% in the year- ago quarter.
Income from continuing operations spiked 40.2% year over year to $58.6 million in the reported quarter.
Balance Sheet
Exiting the second quarter, Triumph’s cash and cash equivalents were approximately $34.8 million compared with $36.4 million in the previous quarter. Long-term debt (net of current portion) was up sequentially at $1,099.1 million from $1,068.5 million in the previous quarter.
For six months ended September 30, cash flow from operations was recorded at $122.1 million (prior to the pension contribution of $61 million), up from $ 123.6 million in the year-ago quarter. The capital spending plummeted to $ 34 million for six months ended September 30 from $41.2 million in the prior-year quarter.
Outlook
Management reaffirmed revenue guidance for fiscal 2012 within the range of $3.2 to $3.5 billion and raised earnings per share from continuing operations to approximately $4.50 per diluted share, excluding integration costs.
Of late, Triumph Group Inc. announced the acquisition of the assets of Aviation Network Services, LLC, a leading provider of repair and refurbishment of aircraft interiors, primarily for commercial airlines.
The acquired business is expected to add approximately $3.0 million of revenue for the remaining five months of fiscal year 2012. It will operate as part of Triumph Interiors, LLC and be included in the Triumph Aftermarket Services Group.
Based in Wayne, Pennsylvania, Triumph Group offers a variety of products and services to the aerospace industry. The company serves commercial and regional airlines, air cargo carriers, as well as OEMs of commercial, regional, business and military aircrafts. It faces stiff competition from its peers, such as AAR Corp. (AIR) and Goodrich Corp. (GR).
We currently maintain a long-term Neutral recommendation on the stock. Triumph Group has a Zacks #4 Rank, which translates into a short-term Sell rating (1-3 months).
