MOOG Inc. Reports Quarterly Results for the Period Ended December 28, 2024

Overview of Financial Performance

The company reported strong financial results in the first quarter of fiscal year 2025, with net sales increasing 6% to $910 million compared to the same period in the prior year. This growth was driven by increased demand in the Commercial Aircraft and Military Aircraft segments, which offset a decline in the Industrial segment.

Gross margin decreased slightly to 26.6% from 27.2% in the prior year quarter, due to an unfavorable sales mix in Military Aircraft and an out-of-period warranty expense in Commercial Aircraft. Research and development expenses also decreased, while restructuring charges increased as the company continued its simplification initiatives.

Net earnings grew 11% to $53 million, or $1.64 per diluted share, compared to $48 million, or $1.48 per diluted share, in the prior year period. The twelve-month backlog remained relatively flat at $2.5 billion.

Segment Performance

Space and Defense The Space and Defense segment reported an 8% increase in net sales to $248 million, driven by higher demand across both the defense and space markets. Operating profit increased 13% to $29 million, with the operating margin expanding to 11.5% from 11.0% in the prior year quarter. The improved profitability was due to the sales growth, partially offset by sales mix changes and investments for upcoming major programs.

Military Aircraft Net sales for the Military Aircraft segment grew 15% to $213 million, primarily due to increased activity on the FLRAA program and new production work. Operating profit increased 17% to $23 million, and the operating margin expanded to 10.7% from 10.5% in the prior year quarter. The margin improvement was driven by the FLRAA ramp-up and lower research and development expenses, partially offset by an unfavorable sales mix.

Commercial Aircraft Commercial Aircraft net sales increased 14% to $221 million, with growth in both the OEM and aftermarket businesses. Operating profit rose 17% to $24 million, and the operating margin improved to 11.0% from 10.6% in the prior year period. The margin expansion was driven by the aftermarket sales growth, partially offset by an $8 million out-of-period warranty expense.

Industrial The Industrial segment reported a 7% decline in net sales to $228 million, primarily due to the impact of divestitures and lower demand in industrial automation. Operating profit decreased 12% to $25 million, and the operating margin contracted to 11.2% from 11.8% in the prior year quarter. Excluding the impact of restructuring and other charges, the adjusted operating margin improved to 13.2% from 12.6%, driven by the company’s simplification initiatives.

Liquidity and Capital Resources

Cash flow from operating activities decreased $193 million in the first quarter of 2025 compared to the prior year period, primarily due to higher use of cash for accounts receivable and customer advances. Investing activities used $19 million of cash, including $33 million for capital expenditures partially offset by $13 million in proceeds from business divestitures.

Financing activities provided $163 million of cash, including $230 million in net borrowings on the company’s credit facilities, partially offset by $39 million for share repurchases and $9 million in dividend payments.

At the end of the quarter, the company had $74 million in cash and cash equivalents, with $64 million held by foreign subsidiaries. The company has access to a $1.1 billion revolving credit facility, of which $515 million was unused at the end of the quarter. The company also has a $500 million senior notes offering and a $125 million receivables financing program.

The company remains in compliance with all covenants under its financing arrangements. Management believes the company’s cash flows from operations, along with its various financing options, will be sufficient to meet its cash requirements for the next 12 months and the foreseeable future.

Strengths and Weaknesses

Strengths

• Diversified portfolio across aerospace/defense and industrial markets
• Strong positions on high-priority military and commercial aircraft programs
• Expanding content on current platforms and pursuing new program opportunities
• Increasing demand in defense, space, and commercial aftermarket segments
• Simplification initiatives driving improved operating efficiency

Weaknesses

• Exposure to cyclical aerospace and defense markets
• Reliance on government contracts that may be subject to funding changes
• Supply chain constraints and inflationary pressures impacting costs
• Declining sales and profitability in the Industrial segment due to divestitures

Outlook and Future Prospects

The company’s long-term strategies center around pricing initiatives to receive fair value for its products and services, as well as simplification efforts to optimize its business portfolio, manufacturing footprint, and operational processes. These initiatives are expected to drive improved profitability and shareholder returns over time.

In the near-term, the company anticipates several significant new program ramps in the aerospace and defense markets that will provide long-term revenue growth opportunities. To prepare for these programs, the company plans to continue investing in its facilities and capabilities at elevated levels.

The company also remains committed to a balanced capital allocation approach, including investing in organic growth, pursuing strategic acquisitions, and returning capital to shareholders through share repurchases and dividends. Management believes this strategy will maximize shareholder value over the long run.

However, the company does face some headwinds, including ongoing supply chain challenges, inflationary pressures, and cyclicality in its end markets. The company’s ability to navigate these issues and successfully execute its strategic initiatives will be critical to its future performance.

Overall, the company’s diversified portfolio, strong market positions, and focus on operational excellence position it well to capitalize on growth opportunities in the aerospace, defense, and industrial sectors. Continued successful implementation of the company’s strategic priorities should enable it to deliver sustainable long-term value for shareholders.