TAT Technologies Surges 54% YTD: Growth Opportunities And Risks Analyzed

seekingalpha09-24

TAT Technologies reported impressive Q2 earnings with revenues up 36% and adjusted EBITDA growing 69%, despite the lack of management commentary.The aerospace supply chain recovery and inventory ...

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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nTAT Technologies Surges 54% YTD: Growth Opportunities And Risks Analyzed\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-24 22:56 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4722979-tat-technologies-surges-54-percent-ytd-growth-opportunities-and-risks-analyzed><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>TAT Technologies reported impressive Q2 earnings with revenues up 36% and adjusted EBITDA growing 69%, despite the lack of management commentary.The aerospace supply chain recovery and inventory ...</p>\n\n<a href=\"https://seekingalpha.com/article/4722979-tat-technologies-surges-54-percent-ytd-growth-opportunities-and-risks-analyzed\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4187","symbol_name":"航天航空与国防","start_time":0,"source_url":"https://seekingalpha.com/article/4722979-tat-technologies-surges-54-percent-ytd-growth-opportunities-and-risks-analyzed","article_id":"2469189334","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2166281350/image_2166281350.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2469189334","pubTimestamp":1727189815,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"I don’t think there are huge imminent risks for TAT Technologies. However, it should be taken into account that the aerospace supply chain has not fully recovered yet and one of the mitigations that aerospace companies implement is increasing inventory, which puts pressure on cash flows. Furthermore, TAT Technologies is ramping up its business which also may lead to elevated inventory levels for a smooth ramp up and expanding the business with new product lines at times may lead to stock being issued as was the case recently when it issued 673,340 shares to raise $10 million. A remote ri","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4187":"航天航空与国防","TATT":"TAT Technologies Ltd"},"translate_title":"TAT Technologies年初至今飙升54%：增长机会和风险分析","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TATT":0.9},"content_text":"TAT Technologies reported impressive Q2 earnings with revenues up 36% and adjusted EBITDA growing 69%, despite the lack of management commentary.The aerospace supply chain recovery and inventory management pose risks, but long-term agreements and a $400 million backlog offer stability and growth potential.TAT Technologies trades at a steep discount to peers, justifying a buy rating despite limited upside for FY26 and potential sustainability concerns.The company's strong growth, especially in the APU business, supports maintaining a buy rating, though caution is advised due to the recent stock rise.   Photofex-AT/iStock Editorial via Getty ImagesI have been covering TAT Technologies (NASDAQ:TATT) since April and the stock has performed very well with a 54.7% return and 25.8% return since July. In this report, I will be discussing the most recent earnings for TAT Technologies, looking at the risks factors and opportunities. I will also update my estimates for the stock price target and rating. TAT Technologies Earnings Grow Double Digits   TAT TechnologiesWhat is somewhat disappointing is that while we have an interesting slide deck presenting the second quarter results, we don't have any valuable comments from management supporting that slide deck. So, what we are left with are impressive numbers, but without a discussion of the growth drivers. Revenues grew 36% to $36.5 million with gross profit jumping 47% to nearly $8 million and driven by EBITDA margin expansion of 230 bps the adjusted EBITDA grew 69% to $4.3 million.   TAT TechnologiesThe table above provides the revenues by product and that is the most detailed insights we are being given as investors. We see that the biggest product categories, namely heat exchange and APU showed solid growth of 54% and 48%. Trading and leasing sales were down, but it should be noted that trading sales can be lumpy and at this point in time some companies are opting to not lock in a gain on sale as assets trade at a premium. Instead, they opt to harvest the value from the asset over time. Landing gear revenues grew by a healthy 15% while other revenues increased 11%. What I liked about the Q2 results is that revenues grew year-on-year and sequentially. Sequential growth was also visible in the APU product line, whereas this was not the case in the previous quarter. What Are The Risks And Opportunities For TAT Technologies? I don’t think there are huge imminent risks for TAT Technologies. However, it should be taken into account that the aerospace supply chain has not fully recovered yet and one of the mitigations that aerospace companies implement is increasing inventory, which puts pressure on cash flows. Furthermore, TAT Technologies is ramping up its business which also may lead to elevated inventory levels for a smooth ramp up and expanding the business with new product lines at times may lead to stock being issued as was the case recently when it issued 673,340 shares to raise $10 million. A remote risk is the fact that the company operates under some long term agreements, for instance an MRO partnership for APUs with Honeywell as well as a 10-year exclusive license for APU leasing and parts trading and a long-term agreement with Republic Airline for landing gear MRO. If those long-term agreements do not get extended, it could affect the company’s revenues. However, I also believe that this provides a streamlined revenue opportunity for the company with significant opportunities to expand its market share for auxiliary power unit sales. The business is supported by a backlog of more than $400 million and had a book-to-bill ratio higher than one during the second quarter providing solid support for the business. TAT Technologies Upside Remains On Peer Group Undervaluation   The Aerospace ForumTo determine multi-year price targets The Aerospace Forum has developed a stock screener which uses a combination of analyst consensus on EBITDA, cash flows and the most recent balance sheet data. Each quarter, we revisit those assumptions, and the stock price targets accordingly. In a separate blog I have detailed our analysis methodology. TAT Technologies is trading significantly ahead of its 2024 and 2025 earnings estimates with only 6% upside towards FY26. However, I am maintaining my buy rating at this moment since the company trades at a steep discount compared to peers while it has significant growth and even with that 58.23% 5-year CAGR on EBITDA being cut in half for FY25 and FY26, we do see some upside and the downside compared to peers remains. Conclusion: TAT Technologies Is Seeing Strong Growth  The growth that TAT Technologies has achieved this year is impressive and with the company ramping up its APU business, I could see more growth ahead. However, the stock has risen significantly and with no investor presentation on the company’s growth path expectations, I am becoming more cautious on TAT Technologies and the fact I am maintaining my buy rating is mostly driven by the fact that the stock trades at a steep discount to peers. I believe that a company such as TAT Technologies should be trading closer to the peer group despite the risk that the earnings growth might not be sustainable over the longer-term. There is still plenty of growth ahead in the APU business and I don’t think there is any major risk that warrants the steep discount compared to the peer group.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2469189334"}