Triumph Group Inc.’s (TGI) adjusted earnings from continuing operations for third-quarter fiscal 2015 ended Dec 31, 2014 came in at $1.42 per diluted share, missing the Zacks Consensus Estimate by 2.1%. The forward loss charges taken into account by the company following The Boeing Company’s (BA) announcement of a production rate cut of its 747-8 fleet resulted in the lower-than-expected earnings. The bottom line however surpassed the year-ago adjusted earnings of 99 cents by an impressive 43.4%.
On a GAAP basis, the company incurred a net loss of 79 cents as compared to earnings of 67 cents per share in the prior-year quarter. There was a difference in the GAAP and adjusted earnings due to the forward loss charges related to the 747-8 program and other onetime acquisition and transaction charges.
Total Revenue
In the reported quarter, net sales were $917.4 million, lagging the Zacks Consensus Estimate by 6.2%. The top line however improved 0.2% year over year.
Despite a year-over-year increase, the top line failed to show strength due to a drop in organic sales. Organic sales declined 7% primarily due to production rate cuts on the C-17 program and lower non-recurring revenues.
Quarterly Operational Highlights
In third-quarter fiscal 2015, the company reported an operating loss of $61.3 million as compared to an operating income of $84.8 million in the prior-year period.
Segment Performance
Aerostructures: Segment sales were $559.5 million, down 12.2% year over year. Organic sales were down 11% primarily due to production rate cuts on the C-17 program and lower non-recurring revenues. Operating loss was $102.5 million as compared to an operating income of $54 million in the year-ago quarter.
Aerospace Systems: Segment sales were up 32.1% year over year to $279.2 million. Organic sales for the quarter increased 2%. Revenues were boosted by the company’s acquisitions made at the end of the first quarter. Triumph Actuation Systems – Yakima and Triumph Actuation Systems – UK and IOM were acquired by the company. Operating income was $41.9 million, up 28.8% year over year from the previous-year figure of $32.5 million.
Aftermarket Services: Segment revenues surged 16% to $80.7 million in the reported quarter primarily due to the positive impact of the Triumph Aviation Services–NAAS Division acquisition. Organic sales for the quarter were up 7%. Operating income was $12.5 million, up from $9.3 million in third-quarter fiscal 2014.
Financial Update
As of Dec 31, 2014, Triumph’s cash balance was $34.2 million compared with $29 million as of Mar 31, 2014. As of Dec 31, 2014, long-term debt (excluding current portion) stood at $40.9 million as compared to $49.6 million as of Mar 31, 2014.
Cash flow from operations after pension contributions, during the first nine months ended on Dec 31, 2014, was $310.0 million. The company made capital expenditure of $85.2 million during this period compared with $161.8 million made in the comparable period last year.
The company repurchased 336,271 shares of its common stock during the reported quarter. As of Dec 31, 2014, the company still has the authority to repurchase about 3.5 million shares.
Guidance
For fiscal 2015, the company expects revenues to be about $3.9 billion. It had earlier given its sales guidance in the range of $3.8–$3.9 billion. It also expects earnings per share for fourth-quarter fiscal 2015 to be about $1.70.
The company’s outlook takes into account the current projected aircraft production rates and a weighted average share count of 50.6 million.
The company expects adjusted EBITDA for fourth-quarter fiscal 2015 to be about $165 million and free cash flow of $300 million for fiscal 2015.
Another Upcoming Release
Spirit AeroSystems Holdings, Inc. (SPR) is expected to release its fourth-quarter results on Feb 3, 2015. The Zacks Consensus Estimate for the quarter is 77 cents.
Our Take
Triumph is focused on global expansion and striving to achieve a balance between its various segments, end markets and customers.
The company successfully completed the transition of the General Dynamics Corporation’s (GD) Gulfstream G650 and G280 wing programs. Recently, Triumph acquired North America Aircraft Services, Inc. (“NAAS”). This acquisition has boosted the company’s aftermarket business. The company’s Aerospace Systems segment also reported impressive sales on account of the acquisitions made by the company.
The company’s focus on expansion of its product capabilities will lead to impressive growth, going forward.
The stock currently carries a Zacks Rank #3 (Hold).
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