Triumph Group: Earnings Preview

| About: Triumph Group, (TGI)

Triumph Group Inc. (NYSE:TGI) will be reporting its third-quarter 2012 earnings on Monday, January 30, 2012, after the market closes.

The current Zacks Consensus Estimate for earnings per share (NYSEARCA:EPS) is $1.13, representing an annualized growth of 26.35%.

With respect to earnings surprises over the trailing four quarters, TGIoutperformedthe Zacks Consensus Estimate in three quarters and was in line in one; leading to an average earnings surprise of 10.18%. The average earnings surprise implies that the company outperformed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Second Quarter 2012 Highlights

On October 31, 2011, Triumph Group Inc. reported encouraging results for the second quarter of fiscal 2012. Second-quarter earnings per diluted share came in at $1.13, showing an improvement from 84 cents in the year-ago comparable quarter. Results also surpassed the Zacks Consensus Estimate of $1.04.

The improved result was driven by significant operating income growth and operating margin expansion generated in the Aerospace Systems segment as well as Aerostructures segment.

In the second quarter of 2012, net sales inched up 2.9% year over year to $790.5 million. Segment wise, sales from Aerostructures rose 1.7% to $588 million from $578 million in the prior-year comparable quarter. Aerospace System revenue grew 8.1% year over year to $134 million, while Aftermarket Services increased 2.9% to $71 million from $69 million in the year-ago quarter. The segmental growth resulted from the company’s good execution in all its segments. In addition, the Aerostructures segment margins benefited from the synergies realized from the Vought acquisition.

Agreement of Estimate Revisions

In the last 30 days, one analyst providing estimate increased the company’s earnings per share (EPS) estimates, while one analyst decreased the EPS estimate for the third quarter 2012. For fiscal 2012, one analyst decreased the estimate. For fiscal 2013 one analyst increased estimate for the last 30 days while one decreased the same.

Magnitude of Estimate Revisions

Estimates over the last 30 days remained intact at $1.13 per share for the third quarter of 2012, representing a year-over-year growth of 26.35%.

Estimate for fiscal 2012 remained same at $4.54 over the last 30 days while that for fiscal 2013 increased marginally from $5.19 to $5.20. These estimates represented a year-over-year growth of 33.82% for 2012 and 14.51% for 2013.

Our Take

Triumph Group is likely to post impressive results in the third quarter of 2012 based on the recent rebound in commercial air traffic and a slight increase in US defense spending. This may call for a rise in demand for the company’s products, equipments and methods of repair and overhaul services. Moreover, we believe that the company’s continued focus on execution and the cost control programs will drive operating income growth and margin expansion.

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 its peers, such as AAR Corp. (NYSE:AIR) and Goodrich Corp. (NYSE:GR).

We currently maintain a long-term Neutral recommendation on the stock. Triumph Group has a Zacks #3 Rank, which translates into a short-term Hold rating (1-3 months).

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