Triumph (TGI) Stock Down On Q1 Earnings Miss; Cuts View

Triumph Group Inc.’s (NYSE:TGI) adjusted earnings from continuing operations for first-quarter fiscal 2017 (ended Jun 30, 2016) came in at $1.04 per share, missing the Zacks Consensus Estimate of $1.13 by 8.7%. Reported earnings also declined 20.6% from $1.31 per share a year ago.

On a GAAP basis, the company reported earnings of 40 cents per share, down 68.5% from the prior-year quarter level of $1.27. Pre-tax charges of $46.1 million or 64 cents per share during the quarter led to the difference between GAAP and adjusted earnings.

Investors reacted negatively to the news, causing the shares of the company to fall 23.9% yesterday.

Total Revenue

In the reported quarter, net sales were $893.3 million, beating the Zacks Consensus Estimate of $872 million by 2.4%. The top line, however, declined 6.9% year over year.

Moreover, organic sales were down 8% primarily due to rate reductions on key Aerospace structures programs.

Operational Highlights

In first-quarter fiscal 2017, the company’s operating income was $46.7 million, down from $107.9 million in the prior year.

Quarterly Segment Performance

Aerospace Structures: Segment sales were $331.6 million, down from $395.1 million in the year-ago quarter. The decline was primarily due to lower production of the 747-8, G450/550 and A330 programs. Operating income was $9.2 million, compared to $41.8 million in the year-ago quarter.

Integrated Systems: Segment sales dipped 0.5% year over year to $257.4 million. Organic sales for the quarter were down 5% from the prior year. Operating income was $48.0 million, down 5.1% from the year-ago level of $50.6 million.

Precision Components: Segment revenues declined 4% to $254.6 million in the reported quarter. The segment reported an operating loss of $7.8 million, compared to operating income of $24.9 million in the prior-year period, which includes pre-tax charges of $26.8 million.

Product Support: Segment sales improved 12.7% year over year to $84.2 million, driven entirely by organic sales. Operating income was $14.1 million, up from the year-ago level of $10.0 million.

Financial Position

As of Jun 30, 2016, Triumph’s cash balance was $31.3 million, compared with $21 million as of Mar 31, 2016. As of Jun 30, 2016, long-term debt (excluding current portion) was $1,492.3 million, compared with $1,374.9 million as of Mar 31, 2016.

Cash flow from operations during the quarter was $84.0 million. The company spent $12.7 million as capital expenditure in the quarter, compared with $18.0 million in the comparable period last year.

Guidance

For fiscal 2017, the company continues to expect revenues to be approximately $3.6 billion to $3.7 billion. Triumph Group, however, lowered its earnings per share guidance to the range of $3.15–$3.45 from the prior projection of $4.90–$5.10.

Triumph Group also expects free cash flow of $100–$120 million and believes that it will generate sufficient amount to fund restructuring initiatives through fiscal 2017.

Peer Reviews

AAR Corporation (NYSE:AIR) reported fourth-quarter fiscal 2016 earnings of 32 cents per share, missing the Zacks Consensus Estimate of 45 cents by 28.9%. The company had reported a loss of 97 cents in the year-ago quarter.

Rockwell Collins Inc. (NYSE:COL) reported results for third-quarter fiscal 2016 ended Jun 30. The company’s adjusted earnings per share of $1.63 surpassed the Zacks Consensus Estimate of $1.59 by 2.5%. Reported earnings also improved 22.6% from $1.33 a year ago.

Raytheon Company (NYSE:RTN) reported second-quarter 2016 adjusted earnings from continuing operations of $1.75 per share, beating the Zacks Consensus Estimate of $1.70 by 2.9%. Earnings also increased 6.1% from the year-ago figure of $1.65.

Zacks Rank

Currently, Triumph carries a Zacks Rank #4 (Sell).

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