The quarter was fine, but the company sees customer-related weakness up ahead.
Issues with various customers are likely to weigh on Triumph Group‘s (TGI 4.31%) results in the quarters to come, a fresh obstacle for this long-suffering aerospace supplier.
Investors are in no mood to wait out the delays. Shares of Triumph traded down 12% for the week as of 2 p.m. Thursday, according to data provided by S&P Global Market Intelligence.
Charges up ahead
Triumph is a collection of aerospace businesses that have performed poorly over the years, causing the stock to lose nearly 80% of its value over the past decade. However, the company is under new management and has shed most of the units that were weighing on results. It has begun to look like a promising turnaround story.
Triumph lost $0.06 per share in its fiscal first quarter, which ended June 30, on revenue of $281 million. The loss was a penny more than expected, but revenue beat by $12 million. It was also the company’s ninth consecutive quarter of year-over-year sales growth, reflecting strong demand for commercial aerospace parts.
Investors were more focused on what is to come. Triumph said it expects to use $70 million to $90 million in cash in the current quarter after previously guiding for a near break-even quarter in terms of free cash. About $60 million of the difference is added net working capital due to issues with Boeing‘s 737 ramp, related cutbacks in engine shipments, and lower military revenue due to supplier glitches.
All of those issues should be short-term in nature, but the guidance was a reminder of what can go wrong.
Is Triumph a buy?
Triumph is much healthier than it was just a few years ago. The company expects to report a full-year fiscal 2025 profit of $0.52 per share, slightly above Wall Street estimates, and expects free cash flow to ramp as the fiscal year goes on.
There are other potential storm clouds investors should be aware of. Boeing’s upcoming labor negotiations could throw a wrench into the recovery or cause the aerospace giant to rethink growth plans.
However, the long-term trends for aerospace demand are positive, and for the first time in recent history, Triumph is well positioned to benefit from those trends. For those looking toward calendar 2025 and beyond, there are reasons to be excited about Triumph Group.
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
