July 29, 2015: Triumph Group reported lower FY1Q2016 earnings below analyst expectations, citing in part decreased production of the commercial Airbus A330 program as well as lower production of the Gulfstream G450/550 and Boeing C-17 and 747-8 airplanes. It’s previously taken large write-offs of the Boeing 747-8 program on its poor sales.
Triumph said in its press release:
The Aerostructures segment reported net sales of $611.8 million in the first quarter of fiscal year 2016 compared to $612.2 million in the prior fiscal year period. Organic sales for the quarter declined fourteen percent primarily due to decreased production on the C-17, 747-8, A330 and G450/G550 programs. Operating income for the first quarter of fiscal year 2016 was $66.0 million, compared to operating income of $68.8 million for the prior year period and included $1.9 million of pre-tax costs related to initial facility consolidation actions. The segment’s operating results for the quarter included a net favorable cumulative catch-up adjustment on long-term contracts of $1.3 million. The segment’s operating margin for the quarter was eleven percent. Excluding the 747-8 program, the segment’s operating margin for the quarter was thirteen percent.
Triumph’s Top 10 programs are mostly Airbus and Boeing commercial airplanes. Boeing makes up more than 10% of Triumph’s 1Q revenue. The earnings call presentation is here. Slide 15 outlines the Top 10 programs.
Goldman Sachs had this initial reaction:
Triumph Group (Neutral; $62 12-month price target) reported F1Q16 operating results below consensus and our estimate. Revenue declined 10% organically and segment EBIT was 12% below our estimate. The midpoint of FY2016 EPS guidance is 6% below consensus, and we believe the free cash flow outlook is likely below consensus expectations.
Reported EPS in the quarter is $1.27, below consensus of $1.34 and our estimate of $1.36. Adjusted EPS of $1.31 excludes an unfavorable $(0.04) impact from pension curtailment. Segment operating profit is 11.6% below our model, with the negative impact partially offset by a lower tax rate and a lower share count. Reported modified adjusted EBITDA is $119mn.
Revenue in the quarter of $959.6mn (up 7% yoy; down 10% organically) is below consensus of $963.2mn and our estimate of $999.1mn, primarily due to production rate reductions on key Aerostructures programs. Segment operating margin is 13.2%, 120 bp below our estimate, with downside in Aerostructures and Aftermarket services more than offsetting upside in Aerospace Systems.
Free cash flow is a use of $(167)mn compared to a use of $(75)mn in the year ago period.
The 747-8 program will cost Triumph about $20m in cash flow this year.
Triumph expects A330 revenue to increase as a result of the June 30 commitment by China for up to 70 A330ceos. This order has yet to be inked into a firm contract by Airbus. The company also will benefit from the recent FedEx order for 50 Boeing 767-300ERFs.
I am very confused about the VLA market. For the 747-8 the picture is clear. The passenger version has a limited future 15-20 orders at best but the freighter version look better at about 50-70. For the a380 on other other hand some say it has aa bright future just is not his time yet. Other say it just need a re-engine to make it more attractive and orders will pick up and others say that airlines find it oversized uneconomical and it should never be designed.i do not know what to believe i am confused can somebody say exactly whats going on
IMHO you see perception management fighting reality … and loosing over time, slowly.
The B side of things has been majorly overstated. Things like “a druglike rush for CFRP” and “Program Accounting” are central features that start to show abrassion defects.
With continued delays and cost overruns should one presume that the era of the 747 passenger program will die on the vine ?