Finance

Triumph Group downgraded two levels to 'underperform' at BofA

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Triumph Group downgraded two levels to 'underperform' at BofA

Aircraft equipment manufacturer Triumph Group was downgraded two levels to 'underperform' by analysts at Bank of America. It came down from a previous 'buy' investment rating.

Analysts said the group had made transformative efforts that have "resulted in a leaner, more focused portfolio". Triumph had recently divested its product support business to AAR in March this year. AAR reported strong first fiscal quarter results, citing the product support business as exceeding expectations.

However, the BofA analysts added: "The changes are being overshadowed by [Triumph's] reliance on uncertain aircraft production rates by Boeing and Airbus."

The analysts said it is concerned of further production cuts from OEMs "could lead to destocking" and cited the potential for a long strike at Boeing, which is still ongoing. In addition, it said OEM deferrals, inflation, and supply chain constraints also present headwinds to the company.

BofA said that production rates for the MAX programme, which comprises around 12% of the company's revenues, varies "significantly" across Triumph's sub-businesses. It added that stabilising its production rates is "critical" for profitability.