Triumph (TGI) Receives Downgrade

NEW YORK (TheStreet) -- Bank of America/Merrill Lynch downgraded Triumph (TGI) to "neutral" from its previous "buy."

Triumph lost 1.3% to $65.28 Wednesday.

The bank set a price target of $73 for the aircraft maker. Analysts cite operating risks in multiple areas as cause for the downgrade.

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Separately, TheStreet Ratings team rates TRIUMPH GROUP INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TRIUMPH GROUP INC (TGI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.3%. Since the same quarter one year prior, revenues slightly increased by 2.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • TGI's debt-to-equity ratio of 0.71 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.88 is weak.
  • TRIUMPH GROUP INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, TRIUMPH GROUP INC increased its bottom line by earning $5.66 versus $5.42 in the prior year. For the next year, the market is expecting a contraction of 15.4% in earnings ($4.79 versus $5.66).
  • In its most recent trading session, TGI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.