We are maintaining our long-term Neutral recommendation on
Triumph Group Inc
The company's strong organic growth based on the addition of
products and services, expansion of operating capacity and
marketing of a complete portfolio of capabilities exude optimism on
the stock. Moreover, Triumph's focus on execution and delivery
improvement continues to enhance client confidence. The company has
been pursuing a cost control program over the last few quarters,
which includes margin improvement backed by strong backlog.
A rising traffic pattern, attributable to higher business
activities, is expected to significantly accelerate maintenance
spending on aircrafts and drive the aftermarket services growth
cycle. Moreover, the aerospace market continues to witness strong
demand across business and general aviation aftermarket parts and
The aviation industry is constantly undergoing development and
change, providing space for aerospace companies to develop new
products, equipment and methods of repair and overhaul services.
Consistent with such developmental trend, new age jet engines by
Triumph's Aerospace System dominates the market for its fuel
efficiency, reduced noise level and exhaust emission
However, risk remains as we witness cyclical commercial
aerospace market. With continued slowdown in freight and passenger
demand, outlook across the cargo market also remains uncertain.
Higher energy and commodity costs further add to the woe.
A large percentage of the company's aftermarket sales come from
third party repair and overhaul, thus exposing it to significant
competition from OEMs as well as third party organizations.
Moreover, demand for Triumph's military and defense products is
largely dependent on government budgets, hence risked with
Geopolitical security issues, declining cargo shipments aircraft
valuations and currency fluctuations may further shrink
profitability as well. Moreover, the risk of third-party
payment-delay hampers credit availability for further product
The company faces stiff competition from its peers, such as
). Triumph Group holds a Zacks #2 Rank, which translates into a
short-term Buy rating (1-3 months).
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