Triumph Continues Triumphant - Analyst Blog

The Circuit Court of the First Judicial District of Hinds County, Mississippi dismissed a suit filed by Eaton Corporation (ETN) against Triumph Group Inc. (TGI). Moreover, in the last few months, the company has been benefiting from the Vought acquisition.

The Vought acquisition has been accretive to earnings with the contribution of $0.30 per share in the second quarter of fiscal 2010. This is expected to be the same in the coming years with synergies of approximately $15.0 million within a year. An increase in the guidance by 60 cents to $6.60 for fiscal 2011 justifies the above statement.

The Vought acquisition has raised the share price by approximately 27% since the acquisition in June 2010. At the present level, the stock looks fairly valued. However, any further upward movement in the share price is expected to make the stock expensive.

Triumph Group has grown significantly over the past decade due to the overall growth in the aerospace equipment and repair market, augmented by a string of more than 30 acquisitions. The company has witnessed its sales increase by more than $300 million in the last three years through its various acquisitions. Currently, Triumph is all set to achieve $2.5 billion in annual sales, a goal it is moving toward through acquisitions.

Recently, Triumph won a three-year contract from The Boeing Company (BA) to provide maintenance, repair and overhaul services for the CFM56-7 engine thrust reversers on the Boeing Next-Generation 737 aircraft. Triumph will also act as a maintenance, Repair and Overhaul supplier for Boeing Quality approval.

Triumph is benefiting from Boeing's strategy of looking for alternatives to its in-house manufacturing and maintenance functions. Triumph has been able to take advantage of these trends through increased market share by concentrating on services and production, where it has a sustainable cost advantage. This could be a reason for Triumph to prosper in the long term.

Hence, we maintain our Neutral recommendation and the stock currently retains its Zacks #3 Rank (short-term Hold rating).