GR Goodrich Corp. (The)

We are maintaining our long-term Neutral recommendation on Triumph Group Inc. (TGI).

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 services.

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 capabilities.

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 uncertainty.

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 offerings.

The company faces stiff competition from its peers, such as AAR Corp. (AIR) and Goodrich Corp. (GR). Triumph Group holds a Zacks #2 Rank, which translates into a short-term Buy rating (1-3 months).

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