Moog Inc. Chief Executive John Scannell is still expecting good things from the Elma aerospace and motion control company, despite uncertainty about the global economy and the potential impact of defense spending cuts on its military product sales.
“We have tremendous diversity in our business,” Scannell said Friday after Moog reported that its fourth-quarter profits rose by nearly 10 percent and narrowly topped analyst forecasts because of strong sales of the products it makes for new airplanes and record sales from its components business. “We think that will help us through next year.”
As a result, Moog executives said they expect earnings to rise by about 8 percent this year, with sales growing by about 7 percent, despite what Scannell described as an uncertain global industrial economic outlook. In spite of that uncertainty, Moog still expects strength from its commercial aircraft markets as sales ramp up for Boeing’s new 787 commercial jet and Airbus’ new A380 jet.
“Of all our businesses, I’d say that’s the one with the biggest bright spot,” Scannell said.
Moog’s forecast also does not assume any drastic cuts in military spending, Scannell said.
During the fourth quarter, Moog’s profits rose to $41.8 million, or 91 cents per share, from $38.2 million, or 83 cents per share, a year earlier, with all of the gain coming from its aircraft controls and components businesses. The earnings beat analyst forecasts by a penny.
The company’s sales grew by 2 percent to $633 million during the quarter that ended in September, up from $619 million a year earlier. The sales were slightly better than the $629 million that analysts were expecting, with growth from the aircraft controls and components units offsetting weakness at its industrial systems business.
Moog said it expects to earn between $3.50 and $3.70 per share during the current fiscal year, compared with $3.33 per share during the fiscal year that ended in September. The company forecast that its sales would rise to around $2.65 billion this year, up from $2.47 million during the fiscal year that recently ended.
Most of the improvement during the fourth quarter came from the company’s aircraft controls and components businesses.
Earnings from the aircraft controls business jumped by 36 percent to $29 million as revenues strengthened by 11 percent to $254 million, or about 40 percent of Moog’s overall sales. Most of that increase came from commercial aircraft equipment, which grew by 28 percent, fueled largely by increased production on Boeing’s new 787 commercial jet. Moog also expects to start reaping more significant sales during the current fiscal year from the components it makes for the Airbus A380 as that program gets closer to full production.
Operating profits from Moog’s components business nearly doubled to $15.1 million as sales rose by 13 percent to a record $100 million because of strength in its medical and industrial markets, as well as for the equipment it makes for remotely controlled vehicles used in offshore oil exploration.
Scannell also noted that the improvement in the profitability of the components business was exaggerated, because of a $2 million write-off the company took a year ago for an investment in new technology that would have been used in CT scanners. “This year’s components business was more normal,” he said.
That strength offset weakness in its industrial systems business, where earnings slid by a third to $12.3 million as sales dropped by 14 percent to $150 million because of lower industrial automation sales, combined with reduced demand for wind energy products and a weaker U.S. dollar.
“The Americas are still solid, Europe is weakening, and Asia is weak,” he said. “For next year, we’re not anticipating any change in that situation.”
Earnings from Moog’s space and defense controls business fell by 11 percent to $10.3 million, despite a 1 percent increase in revenues.