GR Goodrich Corp. (The)

Triumph Group Inc. (TGI) has announced public offering of its common shares with around 2.5 million shares being offered by investment funds associated with the Carlyle Group. The process of stock offering is expected to conclude by May 25.  

Triumph will not receive any proceeds from the sale, while the Carlyle Group, upon completion, will hold approximately a 20% stake in the former.

In early fiscal 2011, Triumph had completed the acquisition of Vought Aircraft Industries Inc. from a private equity firm, The Carlyle Group, for $1.44 billion. Triumph paid $525 million in cash and allotted 7.5 million shares (a 31% stake) to Carlyle. Triumph had issued senior notes to fund the acquisition. The acquired business now operates as Triumph Aerostructures-Vought Aircraft Division.

Based in Wayne, Pennsylvania, Triumph Group offers a variety of products and services to the aerospace industry. The company’s fourth quarter 2011 results were impressive as earnings per share of $2.14 grew 43.6% year over year and also surpassed the Zacks Consensus Estimate of $1.89. 

Net sales shot up 161% year over year to $919.1 million, with organic growth reaching roughly 8%. The year-over-year jump was fueled by the Vought acquisition. The quarter’s revenue also beat the Zacks Consensus Estimate of $865 million.

We are optimistic on the stock based on TGI’s acquisition strategy and internal manufacturing. The company’s cost control measures coupled with continued focus on improvement in execution and cash flow appear encouraging for its future earnings.

For fiscal 2012, management expects sales between $3.2 billion and $3.5 billion and earnings per share within $8.35 to $8.45, excluding integration costs related to the Vought Aircraft acquisition. Shares outstanding are likely to be roughly 25.7 million and the tax rate would probably be around 35.5%. Capital expenditure is expected in the range of $130 million to $145 million.

However, we also believe that the cyclical and competitive aerospace market, the company’s precarious dependence on a few large clients and the risk of decreased defense spending by the U.S government may adversely affect its performance. It faces stiff competition from peers like AAR Corp. (AIR) and Goodrich Corp. (GR).

We currently maintain a Neutral recommendation on the stock.

 
AAR CORP (AIR): Free Stock Analysis Report
 
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TRIUMPH GRP INC (TGI): Free Stock Analysis Report
 
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