Long-suffering Triumph Group (NYSE: TGI) had hoped the company had finally turned a corner heading into 2024, but the latest results provided a reminder that there is still much work to be done. Shares of Triumph traded down 16% as of 11:30 ET Wednesday after the aerospace manufacturer reported an unexpected quarterly loss on weaker-than-expected sales.
A long-awaited turnaround is still coming together
Triumph has been in the doldrums for the better part of the last decade. The shares are down nearly 80% since 2014 due to some poorly timed, ill-advised deals that left the company deeply in debt and with some money-losing businesses.
In recent years, Triumph has been slowly trying to reshape its business via divestitures and restructuring. That process got a big boost back in December when Triumph announced a deal to sell its product support business for $725 million in cash. The announcement caused Triumph shares to soar 30% in a single trading day.
On Wednesday, investors received a reminder that this transformation will take time. Triumph reported a loss of $0.16 per share in its fiscal third quarter ending Dec. 31 on revenue of $284.96 million, falling well short of the $0.14 per share profit on $368 million in sales that Wall Street had expected.
The company's interiors business appears to have underperformed, and cash flow was lighter than analysts had hoped. For fiscal 2024, Triumph said it expects net sales of $1.17 billion to $1.2 billion and free cash flow of $40 million to $55 million. Both ranges are a bit below what analysts had expected.
Is Triumph a buy after a rough earnings report?
The good news for investors is the divesture remains on track to close in the current quarter. CEO Dan Crowley rightly called the sale "transformative for our balance sheet," meaningfully accelerating Triumph's deleveraging process. The company finished the quarter with net debt of $1.468 billion, or about 8 times adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
"Following the divestiture, we are right sizing our cost structure to achieve our multi-year profit margin and cash flow targets," Crowley said. "By strengthening our balance sheet and focusing on our OEM component, spares and IP-based aftermarket business, Triumph will further improve its capacity to win and profitably grow in the expanding markets we serve."
Triumph is slowly healing, but investor patience appears to be wearing thin. For those interested in gaining exposure to the substantial long-term demand for commercial airliners, there are better aerospace stocks to consider.
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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.
