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Summary

  • Triumph Group reported first quarter fiscal 2015 earnings, which misses analysts' estimates.
  • I anticipated that earnings will miss analysts' estimates.
  • This confirms my opinion that Triumph Group is overvalued.

Triumph Group (NYSE:TGI) reported its adjusted earnings from continuing operations of $1.19 per share for the fiscal first quarter 2015, missing analysts' estimates. Earnings decreased 22.7% from the adjusted profit of $1.54 per share a year ago and net sales decreased almost 5% year-over-year to $896.9 million due to a 6% decline in organic sales. The Aerostructures segment reported net sales of $611.9 million compared to $651.9 million in the prior year period. Cut in production rate of Boeing's (NYSE:BA) 747-8 and V-22 programs and lower revenue on 767 program resulted in TGI's lower organic sales.

TGI's operating income was $10.5 million, down from $11.2 million in the first quarter fiscal 2014. On top of that, interest expense remained an additional burden. In my original article I predicted that rising interest burden will continue to be a drag on the company's bottom line. TGI reported that in the first quarter fiscal 2015 ending June 30, its cash balance squeezed to $25.5 million from $29 million as of March 31, 2014. Total debt increased to $1,757.6 million from $1,550.4 million as of March 31, 2014. Clearly, debt-load continued to weigh heavily on the company's balance sheet.

I also opined that TGI's eroding defense business is a cause of worry. In the Aerospace Systems segment, the company's organic sales for the quarter decreased 5% year-over-year due to a cut in the V-22 program and lower military sales. Further, in the Aftermarket Services segment, organic sales declined 9% due to continued military weakness. In my original analysis, I advised investors to avoid the stock above $50 and I continue to hold the opinion.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Update: Triumph Group Earnings

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