What happened

Shares of Triumph Group (NYSE:TGI) climbed more than 10% on Wednesday after the aerospace component supplier announced a surprise quarterly profit. This long-running restructuring story is still a work in progress, but it appears the turnaround is beginning to take hold.

So what

Before markets opened on Wednesday, Triumph reported fiscal third-quarter adjusted earnings of $0.09 per share, compared to a consensus analyst forecast for a $0.06-per-share loss. Revenue, however, at $425 million, came in more than $20 million below estimates.

Quarterly sales were down 32% year over year, before the impact of divestitures, as the COVID-19 pandemic took its toll on the aviation industry, but the company's adjusted margin was a surprisingly strong 11%. The company also reiterated its guidance for full-year revenue of between $1.8 billion and $1.9 billion, in line with the $1.86 billion analyst consensus, and said it expects "breakeven to positive" free cash flow in the fiscal fourth quarter.

A commercial aircraft under construction.

Image source: Getty Images.

Triumph's aerostructures business continues to be a drag, weighed down by a number of soon-to-be-discontinued product lines, but its systems and support unit reported strong sales on growing military business and a ramp up in commercial operations.

"Profitability on an adjusted basis improved sequentially in the quarter, demonstrating measurable recovery toward pre-COVID levels across both business units," CEO Dennis Crowley said in a statement. "Triumph remains focused on protecting the health and safety of our people, conserving cash and partnering with our customers to ensure we are best positioned for recovery for the benefit of all our stakeholders."

Now what

Triumph shareholders missed out on an extended commercial aerospace up cycle, with the shares down 71% over the past 10 years. By comparison shares of TransDigm Group, a well-regarded supplier, are up 656% during the same period. Crowley was hired in January 2016 to reverse the declines, and has orchestrated a comprehensive restructuring including divestitures of unprofitable businesses to try to fine-tune Triumph into a profitable enterprise.

The recovery has been choppy, and external factors including the pandemic have not helped, but Triumph is steadily showing signs that the worst is behind it. The stock is now up more than 250% from its March pandemic low.

There is still a lot of work to be done. But the outlook for Triumph is better today than it has been in a long time.

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