MOOG Inc. Reports Quarterly Results for the Period Ended June 29, 2024
MOOG Inc. filed its quarterly report on Form 10-Q for the period ended June 29, 2024. The company reported net sales of $1.23 billion, a 10% increase from the same period last year. Gross profit margin was 34.1%, and operating income was $143.8 million, a 15% increase from the same period last year. Net income was $94.5 million, or $1.33 per diluted share, compared to $74.1 million, or $1.04 per diluted share, in the same period last year. The company’s cash and cash equivalents were $444.8 million as of June 29, 2024, and its debt was $1.23 billion. The company did not repurchase any shares of its common stock during the quarter.
Financial Performance Overview
Leveraging its engineering heritage and customer intimacy, the company has expanded its control product franchise across multiple markets, growing from a high-performance components manufacturer to a systems designer, manufacturer and integrator. The company continues to focus on pricing and simplification initiatives to drive shareholder value through strategic revenue growth, operational efficiency improvements and low-cost manufacturing.
In the third quarter and first nine months of fiscal year 2024, the company reported strong financial results. Net sales increased 6% and 10% respectively compared to the same periods in 2023, driven by growth across the company’s aerospace and defense segments. Gross margin also improved, rising to 27.8% in the third quarter and 27.9% year-to-date, aided by the company’s pricing initiatives, improved performance on space programs, and a one-time benefit from the Employee Retention Credit.
Segment Performance
Space and Defense This segment saw net sales increase 7% in both the third quarter and first nine months of 2024, led by higher demand for defense applications and the production ramp of a launch vehicle program. Operating margin expanded significantly, reaching 12.6% in the third quarter and 13.3% year-to-date, due to improved performance on space vehicle development programs.
Military Aircraft Net sales for this segment grew 18% in the third quarter and 11% year-to-date, fueled by increased activity on development and production aircraft programs. Operating margin improved to 11.6% in the third quarter and 10.1% year-to-date, as the company benefited from better cost absorption and reduced R&D expenses.
Commercial Aircraft This segment experienced a 6% sales increase in the third quarter and 24% growth in the first nine months, driven by production ramps on widebody and other programs. Operating margin expanded to 12.9% in the third quarter and 11.8% year-to-date, aided by pricing initiatives and higher sales volumes.
Industrial Net sales for the Industrial segment were down slightly in the third quarter but up 3% year-to-date, as growth in the simulation/test and energy markets offset weaker industrial automation sales. Operating margin decreased to 9.8% in the third quarter and 10.9% year-to-date, impacted by restructuring charges and an inventory write-down, though the company’s pricing actions and the Employee Retention Credit helped offset these pressures.
Outlook for 2024
Looking ahead, the company expects continued sales growth across its aerospace and defense businesses in 2024, with Space and Defense, Military Aircraft, and Commercial Aircraft all projected to see double-digit percentage increases. The company also anticipates higher operating margins, driven by the benefits of its pricing and simplification initiatives as well as the Employee Retention Credit, though this will be partially offset by higher interest expense and a higher tax rate.
Excluding the impact of impairments, inventory write-downs, and restructuring charges, the company expects its adjusted operating margin will reach 12.4% in 2024, up from 10.9% in 2023. Adjusted diluted earnings per share are forecasted to be in the range of $7.30 to $7.50, with a midpoint of $7.40.
Strengths and Weaknesses
Strengths
- Diversified aerospace and defense portfolio with leading market positions
- Successful execution of pricing and simplification initiatives to drive margin expansion
- Strong performance in high-growth space and defense markets
- Solid cash flow generation to fund investments and return capital to shareholders
Weaknesses
- Exposure to cyclical commercial aerospace market, which remains below pre-pandemic levels
- Ongoing challenges in the industrial automation market
- Potential for higher interest expense and tax rates to pressure profitability
Outlook and Risks
The company appears well-positioned for continued growth and margin improvement in 2024, leveraging its diversified aerospace and defense businesses and the benefits of its strategic initiatives. However, the company faces some risks, including potential volatility in the commercial aerospace market, ongoing supply chain pressures, and the possibility of higher interest rates and taxes weighing on profitability.
Additionally, the company’s reliance on government contracts, particularly in the defense market, exposes it to funding uncertainties. Any material changes to defense spending levels or program cancellations could impact the company’s performance. Successful execution of its strategic priorities, effective management of costs, and continued innovation will be critical for the company to navigate the evolving market landscape and deliver value to shareholders.
Overall, the company’s strong financial results in 2024 and its positive outlook for the year ahead suggest it is making progress in its transformation and well-positioned to capitalize on opportunities in its key markets. However, investors should monitor the company’s ability to manage the various risks and challenges it faces to sustain its growth and profitability going forward.
