Triumph (TGI) To Divest Multiple Units To The Gores Group

Triumph Group, Inc. (NYSE:TGI) has recently inked a deal with Gores Small Capitalization Partners, an affiliate of The Gores Group, to sell off its Triumph Air Repair; the Auxiliary Power Unit (APU) Overhaul Operations of Triumph Aviation Services – Asia, Ltd.; and Tempe, AZ-based Triumph Engines. Financial details of the deal were, however, kept under wraps. Subject to the required approvals, the transaction is expected to close in early 2017.

Acquisition Synergies

The Gores Group is a global investment firm that acquires controlling stakes in mature and growing businesses.

Triumph Air Repair and the APU Overhaul Operations of Triumph Aviation Services – Asia are global leaders of independent aerospace component maintenance, repair and overhaul primarily focused on APUs and related products. Meanwhile, Triumph Engines is a supplier of hot-section component manufacturing and repair services for original equipment manufacturers, aircraft operators, and repair and overhaul providers.

These businesses generated cumulative revenues of nearly $81 million in the fiscal year ended Mar 31, 2016.

Post the acquisition,the combined entity is expected to leverage The Gore Group’s operating expertise and flexible capital base to provide high-quality service to its clients, in addition to driving growth, both organically and inorganically.

The acquired units will continue to operate at their existing facilities in Arizona and Thailand, and even retain the management team, and technical and supporting staff. Full integration of the businesses is expected to be complete in 2017.

Notably, the sell-off is in line with Triumph Group’s transformation plan, which involves divesting non-core businesses to allow reinvestment into the core businesses and position the company for long-term growth.

Price Movement

Triumph Group has largely underperformed the Zacks categorized Aerospace-Defense Equipment industry over the last 12 months. Share price of Triumph Group dropped 18.8% while the industry gained 18.6% during this period.

The primary reason for this underperformance could be poor organic sales growth, along with volatility in energy and commodity prices. Further, concentration of customers, a reduced U.S. military spending budget, and competitive pressures are weighing on the stock.

Zacks Rank & Key Picks

Triumph Group currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the aerospace and defense space include Engility Holdings, Inc. (NYSE:EGL) , Northrop Grumman Corporation (NYSE:NOC) and Lockheed Martin Corporation (NYSE:LMT) .

On an average, Engility posted a positive earnings surprise of 23.19% in the trailing four quarters. The company’s 2016 estimates have risen 13.3% over the last 60 days. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Northrop flaunts a Zacks Rank #1 as well. The company’s 2016 estimates have increased 6% over the last 60 days. On an average, the company delivered a positive earnings surprise of 8.3% in the trailing four quarters.

Lockheed Martin currently carries a Zacks Rank #2 (Buy). The company’s 2016 estimates have risen 3.8% over the last 60 days. On an average, it has delivered a positive earnings surprise of 11.4% in the trailing four quarters.

Zacks’ Best Private Investment Ideas

In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?

Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>