Triumph Group Inc TGI could reach positive free cash flow by 2021. Aerostructures, which had a negative cash profile, has started providing upside to shareholders, according to Bank of America Merrill Lynch.
The Analyst
Bank of America's Ronald Epstein upgraded Triumph Group from Underperform to Buy, raising the price target from $20 to $35.
The Thesis
The acquisitions made by Triumph Group’s previous managements, including Vought Aircraft Industries and the Gulfstream wing programs from Spirit AeroSystems Holdings, Inc. SPR, continue to be a severe cash drag. The risk of insolvency has declined, Epstein said, with current management having found strategic solutions to become free cash flow positive by 2021.
Management outsourced Gulfstream G650 wing box and wing completion work to Gulfstream last April. The Gulfstream G650 program has already become free cash flow positive. Earlier this month, the Bombardier Global 7500 wing program was sold to Bombardier. The commitment made by Triumph to Boeing Co BA for the 747 ends in 2021.
Triumph is looking to forming a strategic partnership with AeroSpace Technologies of Korea on the Embraer E2 EJets program. The company is also in talks with Israel Aerospace Industries on the Gulfstream G280 program.
The analyst estimates the company to generate free cash flow of $127 million in 2021 and $164 million in 2022.
Price Action
Shares of Triumph Group almost 5.2 percent to $22.80 Monday afternoon.
Related Links:
Benzinga's Top Upgrades, Downgrades For February 11, 2019
Earnings Scheduled For February 7, 2019
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