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Triumph Group (TGI) Up 109% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Triumph Group (TGI - Free Report) . Shares have added about 109% 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 its most recent earnings report in order to get a better handle on the important drivers.

Triumph Group Post Better-Than-Expected Q2 Earnings

Triumph Group’s second-quarter fiscal 2021 (ended Sep 30, 2020) adjusted loss was 8 cents per share, narrower than the Zacks Consensus Estimate of a loss of 19 cents. The bottom line however deteriorated from adjusted earnings of 63 cents recorded in the prior-year quarter.

Including one-time adjustments, the company incurred GAAP loss of 64 cents per share in the fiscal second quarter against earnings of 84 cents reported in the year-ago quarter.

Reduced sales and operating income in the fiscal second quarter resulted in the deterioration in the bottom-line figure.

Total Sales

Net sales in the quarter under review came in at $481.8 million, outpacing the Zacks Consensus Estimate of $458 million by 5.2%. However, the top line slumped 37.6% on a year-over-year basis.

After taking divestitures into account, organic sales in the quarter went down 33% year over year due to planned reductions on sunsetting and transitioned programs, impacts of the COVID-19 pandemic, and resulting production rate decreases primarily on commercial programs.

Operational Highlights

In second-quarter fiscal 2021, the company generated adjusted operating income of $21.4 million, which declined 63.8% from the year-ago quarter’s figure. Adjusted operating margin of 4.4% contracted 330 basis points from 7.7% in the second quarter of fiscal 2020.

Interest expenses and other amounted to $52.5 million, up from $35.4 million in the prior-year quarter.

Backlog came in at $2.40 billion, down year over year on a sequential basis due to divestitures, sunsetting programs and recent production rate reductions.

Segmental Performance

Aerospace Structures: Segment sales totaled $254.2 million, down 45.9% from $422.6 million in the year-ago quarter. The segment incurred operating loss of $2.5 million, reflecting a significant deterioration from the year-ago period.

Systems & Support: Segment sales declined 28% year over year to $254.2 million. Operating income was $29.6 million, reflecting deterioration from the year-ago quarter’s operating income of $62.3 million.

Financial Position

As of Sep 30, 2020, Triumph Group’s cash and cash equivalents totaled $440.2 million compared with $485.4 million as of Mar 31, 2020.

Its long-term debt (excluding current portion) amounted to $2 billion as of Sep 30, 2020, compared with $1.80 billion as of Mar 31, 2020.

Net cash used in operating activities during the first two quarters of fiscal 2021 was $239.7 million compared with $10.6 million a year ago.

The company’s capital expenditures were $12.8 million during the first two quarters of fiscal 2021 compared with $17 million in the year-earlier quarter.

Guidance

Triumph Group reaffirmed financial guidance for fiscal 2021. The company continues to expect to generate net sales of $1.8-$1.9 billion. The Zacks Consensus Estimate for revenues of $1.84 billion lies below the mid-point of the guidance.


 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 43.78% due to these changes.

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. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions 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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