Triumph Exceeds Expectations – Analyst Blog

Recently, Triumph Group Inc. (TGI) reported fourth quarter and fiscal year EPS of $1.49 and $5.12, respectively, compared with $1.36 and $5.59 in the same period of the previous year. Both have surpassed the Zacks Consensus Estimates of $1.18 and $4.90, respectively. 2010 EPS also exceeded the management’s guidance of $4.80.

Fourth quarter net income was $24.7 million, up from $20.9 million in the year-ago quarter and total sales were $352.0 million as compared with $311.2 million in the fourth quarter of fiscal 2009.

Sales from Aerospace System grew 17.8% year over year to $294.2 million, while Aftermarket Services dropped 5.8% to $58.5 million.

The decrease was primarily due to lower passenger and freight traffic and the continued effects of deferring maintenance and inventory de-stocking.

Operating income was $47.3 million, up from $35.4 million during the same period of fiscal 2009. Approximately, $1.25 million of start-up costs related to its Mexican facility were also included in the fourth quarter results.

Full-year net income and sales were $67.8 million and $1,294.8 million, respectively, up from $88.0 million and $1,240.4 million in fiscal 2009.

Sales from Aerospace System moved up 8.6% year over year to $1,073.5 million, while from Aftermarket Services slipped 11.6% to $225.0 million.

The company reported an operating income of $155.3 million, compared with $151.9 million in fiscal 2009, representing an increase of 2.2%. Approximately, $4.1 million of start-up costs related to its Mexican facility were also included in the results.

At the end of fiscal 2010, net debt was $359.1 million, down from $444.9 million at the end of fiscal 2009. 

Triumph continues to remain focused on growing its core businesses as well as growing through strategic acquisitions and has recently acquired Vought Aircraft Industries Inc. Triumph has grown strongly over the past decade as a result of overall growth in the aerospace equipment and repair market, augmented by a string of more than 30 acquisitions. Triumph has set its sight on achieving $1 billion in annual sales and has been moving toward its goal through acquisitions.

The company has witnessed its sales increase by more than $200 million in the last three years through its seven largest acquisitions. We expect mergers and acquisitions to continue in order to facilitate the company reach its $1 billion annual sales goal.

For 2011, management expects an EPS of approximately $4.65 and sales within the range of $1.3 to $1.4 billion.

However, huge dependence on government spending and Boeing, its largest customer, is discouraging. During 2010, the company generated more than 10% of its total revenue from Boeing. We maintain our Neutral recommendation on the stock.