Long-struggling aerospace component manufacturer Triumph Group (TGI 1.79%) reported a surprise quarterly profit and guided for stronger-than-expected full-year revenue. Investors are cheering the unexpected good news, sending Triumph shares up about 15% as of 10 a.m. ET on Tuesday.
Has Triumph Group finally turned the corner?
Triumph is the market of components and subsystems for a range of military and commercial aerospace platforms. The stock has lost nearly 90% of its value over the last decade as Triumph has struggled to turn a profit on key programs and suffered other operational setbacks.
The company has slowly been trying to reshape its portfolio, including by restructuring or selling a number of unprofitable businesses. But the pandemic, supply chain disruptions, and labor shortages have hindered those efforts.
It appears the turnaround might finally be gaining traction. Triumph earned $0.01 per share in its fiscal second quarter (ending Sept. 30) on revenue of $354.06 million, beating Wall Street expectations for a $0.01-per-share loss on sales of $337.4 million.
Net sales were up 16% year over year, and the company posted an operating margin of 9.7%.
"Triumph generated its sixth consecutive quarter of year-over-year organic sales growth driven by continued strong commercial aftermarket demand," CEO Dan Crowley said. "We continue to expect free cash flow to improve over the course of the year, as the first-half working capital build supports our higher second-half deliveries."
Is Triumph a buy after its surprise quarterly profit?
Triumph ended the quarter with its highest backlog of future business since March 2020. The company also boosted its full-year fiscal 2024 revenue guidance to between $1.43 billion and $1.47 billion, from $1.39 billion to $1.43 billion, and said it sees full-year free cash flow coming in at between $40 million and $50 million.
It appears, at long last, that Triumph is heading in the right direction. But investors need to understand that this is a long-term rehabilitation project and patience will be required. Triumph is also benefiting from strong demand for new and used aircraft, but potential issues with production lines or a slowdown in travel demand could lead to more delays in the recovery timeline.
Triumph is on the right path but is a long way from its destination. The company for the first time in years looks investable, but there remain many better options for investors looking to buy into commercial aerospace right now.
