Triumph to Acquire GE Actuation Business - Analyst Blog

Aerospace and defense company Triumph Group, Inc. TGI entered into a definite agreement to acquire the hydraulic actuation business of GE Aviation, a subsidiary of General Electric Company GE. This transaction will further strengthen Triumph Group's Aerospace Systems segment.

Triumph Group will pay $70 million for the actuation business, which is expected to be immediately accretive to earnings. The actuation business has three facilities, which are expected to generate $180 million in annual revenues. This business has commercial ties with The Boeing Co. BA, Airbus and other major airframers.

GE Aviation's advanced technology and penetration in the aviation market will make this a lucrative buy for Triumph Group. The services offered by the actuation business of GE Aviation find demand across commercial, business and military jet markets.  

Even if we let go of military demand, a study from Boeing revealed that there is a huge potential in the commercial aerospace market. Boeing's study forecasts demand for 35,280 airplanes for the 2013-2032 period. In that light the actuation business will be a strategic fit for the company's aerospace operations.

In the fourth quarter of fiscal 2014, revenues from Aerospace Systems increased 28% year over year to $235.3 million, of which 30.2% came from recent acquisitions like Triumph Processing-Embee, Triumph Engine Control Systems and Triumph Gear Systems-Toronto.  So it seems like the company is presently opting for an inorganic growth strategy to expand this lucrative business.

Triumph Group expects earnings from continuing operations for fiscal 2015 in the range of $5.65 to $5.75 per share. The Zacks Consensus Estimate for fiscal 2015 is pegged at $5.71 per share.

Triumph Group presently carries a Zacks Rank #3 (Hold). Investors interested in the aerospace and defense equipment industry may consider stocks like Spirit AeroSystems Holdings, Inc.SPR among others. Spirit AeroSystems holds a Zacks Rank #2 (Buy).