Stronger earnings from its industrial business, as well as its space and defense units, pushed up Moog Inc.’s third-quarter profits by 41 percent, the Elma-based aerospace company said Friday.
The earnings were stronger than analysts forecast, and the company said it expects sales for the entire fiscal year to be slightly stronger than it predicted during the spring.
Moog also said it expects its profits to grow by 16 percent during the upcoming fiscal year, which begins in October, despite sales that it forecasts to rise by just 1.5 percent over its projected level of $2.65 billion this year.
But that forecast, which calls for earnings per share of $4.25 and sales of $2.69 billion next year, was weaker than the profits of $4.56 per share and sales of $2.73 billion that analysts were expecting. That lower forecast sent shares down $4.37, or 6.14 percent, to close Friday at $66.79. The stock is up 16 percent from a year ago.
“It was a good quarter,” said John Scannell, Moog’s chairman and chief executive officer.
Scannell said the company expects its profitability to improve next year, despite challenges in its aircraft business that have been making that work less lucrative.
That trend was apparent during the third quarter, when profits jumped to $48.1 million, or $1.08 per share, compared with $34.2 million, or 75 cents per share, a year ago. Third-quarter earnings were better than the $1.03 cents per share analysts were expecting. Sales of $683.7 million also were better than the $671 million that analysts had forecast.
While much of Moog’s 2 percent increase in sales came from its aircraft business, which accounts for about 43 percent of revenues, the profitability of the aircraft business weakened during the quarter, causing the unit’s operating profits to dip by 2 percent to $30.3 million.
Moog’s sales of commercial aircraft systems, especially to Boeing and Airbus, jumped by 25 percent during the quarter, while sales of replacement parts also grew by 20 percent because of the stockpiling of spare parts for the new Boeing 787 jet.
The company’s military aircraft sales fell by 5 percent, as revenues from the F-35 fighter jet declined by 20 percent and revenues for systems used on helicopters also dropped.
“Our research and development costs continue to run higher than we were expecting,” Scannell said. “Half of our commercial business is on brand new programs, so that’s a bit of a margin headwind” that likely will last for two to three years, until those programs move into full-scale production.
Moog said its sales to the wind energy industry grew because of a new pitch controls system for wind turbines that it introduced in Brazil, which helped offset lower revenues from its simulation and test products that the company blamed on inventory adjustments by some of its customers.
Operating profits at Moog’s space and defense controls unit jumped by 29 percent to $8.7 million, even though sales grew just 2 percent to $103 million. Sales of products for the space market increased because of rising revenues from components for satellites, launch vehicles and the NASA Soft Capture System, which is used for docking with the International Space Station. That offset lower sales to the defense sector.
Earnings from Moog’s components business fell by 8 percent to $17 million as sales dipped by 2 percent to $111 million as revenues for components used in new military aircraft weakened.
The company’s medical device business, which Moog is attempting to sell, earned $2.3 million during the quarter, reversing a $2.8 million loss a year ago.
Medical device sales fell by 24 percent to $29 million as revenues from its pump and administration sets weakened. About a third of the decline stemmed from the company’s sale of its Ethox Buffalo unit last June.
Moog executives thought they were on the verge of selling the medical device business earlier this year, only to have the deal fall through.
While it still would like to sell the business in its entirety, it also is considering selling it off by product line.