On Wednesday, TD Cowen adjusted its price target for Triumph Group (NYSE:TGI) shares, increasing it to $20.00 from the previous $14.00. The firm has chosen to maintain a Hold rating on the stock. This adjustment comes in light of Triumph Group's second-quarter performance, which saw stronger-than-anticipated adjusted earnings per share (EPS) and cash flow, particularly given that this quarter was expected to be the most challenging comparison of the year.
The analyst from TD Cowen highlighted the company's credible financial guidance for fiscal year 2025, suggesting that it supports the potential for a financial turnaround. The new price target of $20.00 is based on 11 times the calendar year 2025 Total (EPA:TTEF) Enterprise Value to Earnings Before Interest, Taxes, Depreciation, Amortization, and Pension (TEV/EBITDAP), which is slightly below the industry peers.
The decision to maintain the price target slightly lower than peers is attributed to Triumph Group's current net debt leverage, which stands at 5.6 times. Additionally, the company's recovery trajectory is still taking shape, indicating that while positive steps are being made, the full recovery process is ongoing.
Triumph Group's recent quarterly results have evidently strengthened the confidence of TD Cowen in the company's ability to improve its financial standing. The firm's analysis suggests that despite the high leverage and the recovery still being in progress, there is a clear pathway to improved financial health for Triumph Group.
In other recent news, Triumph Group has demonstrated notable growth in its Q2 FY25 performance, with a 13% year-over-year increase in aftermarket revenue and a 34% surge in commercial aftermarket sales. Total revenue for the quarter reached $287 million, with adjusted operating income and adjusted EBITDA rising by 44% and 26% respectively.
The company's interiors business has returned to profitability, and a new contract for the T-55 engine fleet is expected to generate significant revenue. Triumph's backlog has also expanded, reflecting an optimistic outlook on aftermarket demand due to maintenance needs of older aircraft and delays in new aircraft deliveries. These recent developments suggest a positive trajectory for Triumph Group, particularly with its raised FY25 guidance, now anticipating net sales of roughly $1.2 billion.
Adjusted EBITDA is projected to be between $190 million and $195 million. The company has also reduced its net debt to $868 million, marking a substantial $644 million decrease from the previous year. Despite some challenges in the V-22 production and LEAP gearbox output, the growth in commercial aftermarket sales, especially from the 787 and 777 programs, provides a promising outlook.
InvestingPro Insights
Triumph Group's recent performance and TD Cowen's upgraded price target are supported by several key metrics from InvestingPro. The company's revenue growth of 15.72% over the last twelve months and a strong operating income margin of 9.81% indicate improving financial health, aligning with the analyst's positive outlook.
InvestingPro Tips highlight that Triumph Group's net income is expected to grow this year, and analysts predict the company will be profitable this year. These projections support TD Cowen's view of a potential financial turnaround. Additionally, the stock has shown significant returns, with a 78.7% price total return over the past year and a 43.7% return over the last three months, reflecting growing investor confidence.
However, it's worth noting that the stock's RSI suggests it may be in overbought territory, which investors should consider alongside the positive outlook. For a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide further insights into Triumph Group's financial position and market performance.
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