Back to top

Analyst Blog

On Aug 14, we have issued an updated research report on Triumph Group, Inc. (TGI - Analyst Report). Systematic investment in strategic acquisitions, stable backlog, steady flow of contract wins and practice of paying dividends at regular intervals are expected to boost this aerospace and defense product and service provider’s future performance. However, over-dependence on government spending and volatility in commodity prices are causes of concern.

Triumph Group, a Zacks Rank #2 (Buy) stock, reported unfavorable results in the first quarter of fiscal year 2015. The company’s earnings per share and revenues missed the Zacks Consensus Estimate and decreased year over year, mainly due to lower organic sales as a result of production rate cuts on the 747-8 and V-22 programs.

Triumph Group is however continuously expanding its product offering through acquisitions and the addition of products and services. Recently, the company acquired the hydraulic actuation business of GE Aviation, a subsidiary of General Electric Company (GE - Analyst Report), for $70 million. The acquisition will enable Triumph Group to enhance its product portfolio, thereby meeting increasing customer demand from the commercial, business and military jet markets. Earlier, the company had completed a number of significant acquisitions, including the Insulfab product line from Chase Corporation and General Donlee Canada Inc.

At the end of the fiscal first quarter, Triumph Group had an order backlog of $5.01 billion. During the quarter, the company won several important contracts from Airbus and The Boeing Company (BA - Analyst Report). A steady flow of contract wins will boost Triumph Group’s future cash inflows.

In addition, Triumph Group continues to share profits with its shareholders through the payment of dividends and an effective share repurchase program. These initiatives will enable the company to retain investors’ interest in the stock.

On the flip side, declining spending trend in the military end market is expected to continue unabated as defense budgets come increasingly under pressure. This may negatively impact Triumph Group’s order book due to cancellation of existing orders or not wining enough of new ones.

Key Picks from the Sector

Besides Triumph Group, another stock worth considering in the same sector is Ducommun Inc. (DCO - Snapshot Report), which carries a Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.