We recently upgraded our recommendation on Triumph Group Inc. (TGI) to Outperform from Neutral.
We believe that the constant development and improvement in the aviation industry along with a recent rise in demand for commercial air transport strengthen our outlook on the stock.
Moreover, Triumph’s expansion of operating capacity and marketing of its portfolio of capabilities is anticipated to enhance organic growth. The cost control program and focus on cash flow improvement are also expected to generate stronger future revenue. The company’s significant Vought acquisition is expected to boost both sales and earnings, going forward.
However, the company operating in the cyclical aerospace market is exposed to the risk of overcapacity and increased third party competition in the areas of aftermarket sales and original equipment manufacturer (OEM).
The company’s dependence on a few large customers as well as the risk of decreased defense spending by the U.S government adds up to the peril.
Triumph Group remains committed toward paying dividends to its shareholders. The company recently declared a two-for-one stock split with respect to its common stock, in the form of 100% stock dividend. Triumph Group has planned to pay a quarterly dividend at the rate of $0.04 per share.
Moreover, the company recently declared a public offering of 2,500,000 shares of common stock.
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 peers like AAR Corp. (AIR) and Goodrich Corp. (GR).
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