Press release·11/27/2024 20:45:31

Financial Performance Overview

Moog Inc., a leading manufacturer of high-performance control systems and components, has reported strong financial results for the fiscal year 2024. The company’s net sales increased by 9% to $3.61 billion, driven by growth across all its business segments - Space and Defense, Military Aircraft, Commercial Aircraft, and Industrial.

Gross margin improved to 27.6% in 2024, up from 26.9% in 2023, due to improved performance on space vehicle development programs, a $14 million benefit from the Employee Retention Credit, and the results of Moog’s pricing and simplification initiatives. Research and development expenses increased by 6% to $113 million, as the company invested in new growth programs in Space and Defense and Industrial, partially offset by a reduction in Military Aircraft. Selling, general, and administrative expenses as a percentage of sales decreased to 13.7% in 2024 from 14.2% in 2023, reflecting the incremental benefit from higher sales volume.

Interest expense decreased to $62 million in 2024 from $64 million in 2023, due to the capitalization of $10 million of interest associated with certain major long-term capital projects. The effective tax rate was higher in 2024 at 22.6% compared to 20.9% in 2023, as the prior year included higher amounts of research and development tax credit benefits.

Net earnings increased by 21% to $207 million in 2024, or $6.40 per diluted share, compared to $171 million, or $5.34 per diluted share, in 2023. The twelve-month backlog at the end of fiscal 2024 increased to $2.5 billion, up from $2.42 billion a year earlier, driven by higher orders in the Commercial Aircraft and Space and Defense segments, partially offset by the timing of orders in the Military Aircraft segment.

Segment Performance

The Space and Defense segment saw a 7% increase in net sales to $1.02 billion in 2024, driven by strong demand for defense applications and a 26% increase in space program sales. Operating margin in this segment improved to 12.5% from 10.1% in the prior year, due to strong operational performance, including improved performance on space vehicle programs, and the benefits from Moog’s pricing initiatives.

In the Military Aircraft segment, net sales increased by 13% to $812 million, primarily due to growth on development and production aircraft programs. Operating margin improved to 10.6% from 8.4% in 2023, driven by the benefits of cost absorption from having a full year of activity on the FLRAA program and a reduction in research and development expenses.

The Commercial Aircraft segment reported an 18% increase in net sales to $788 million, driven by growth in both commercial OEM and aftermarket sales. Operating margin decreased to 11.6% from 12.6% in 2023, as the absence of favorable aftermarket retrofit activity and the sale of inventory upon exiting a mature platform from 2023 were partially offset by higher production volume in 2024.

In the Industrial segment, net sales increased by 1% to $991 million, with growth in the simulation and test market and the energy market, partially offset by a decline in the industrial automation market. Operating margin decreased to 9.1% from 10.4% in 2023, due to higher amounts of simplification charges, including impairment, restructuring, and inventory write-down charges of $32 million.

Strengths and Weaknesses

Moog’s key strengths include its strong engineering heritage, focus on customer intimacy, and ability to expand its control product franchise into multiple markets. The company has successfully transitioned from a high-performance components manufacturer to a high-performance systems designer, manufacturer, and integrator. Moog’s emphasis on pricing and simplification initiatives, such as shaping its product and business portfolio, rationalizing its footprint, and investing in automation and technologies, have also contributed to its financial performance.

One potential weakness is the company’s exposure to the cyclical nature of the aerospace and defense, and industrial markets. Moog’s performance is heavily dependent on factors such as defense spending, commercial aircraft production, and industrial automation demand, which can be subject to economic and geopolitical fluctuations. The company’s ability to manage these market risks and continue to innovate and diversify its product offerings will be crucial to its long-term success.

Outlook and Future Prospects

Moog’s outlook for fiscal 2025 is generally positive, with the company expecting higher sales and improved operating margins across most of its business segments. In the Space and Defense segment, the company anticipates continued growth in both its space and defense markets, driven by strong demand for defense products and increased investments in space programs.

In the Military Aircraft segment, Moog expects sales growth in both OEM and aftermarket programs, as well as improved operating margins due to the transition of several programs from development to production and the benefits of its pricing initiatives. The Commercial Aircraft segment is expected to see sales growth, although operating margins may decrease due to an unfavorable sales mix and the recovery of production at one of the company’s facilities.

The Industrial segment is expected to see a decrease in sales due to portfolio shaping activities, but operating margins are expected to improve due to the savings from simplified operations and the benefits of Moog’s pricing initiatives.

Overall, Moog’s management is confident in the company’s ability to continue creating long-term value for shareholders through strategic revenue growth, both organic and acquired, improving operating efficiencies and manufacturing initiatives, and utilizing low-cost manufacturing facilities without compromising quality. The company’s focus on innovation, talent development, and capital deployment, including strategic acquisitions and returning capital to shareholders, should help position Moog for future success.

Conclusion

Moog’s strong financial performance in fiscal 2024, with increased sales, improved profitability, and a growing backlog, demonstrates the company’s ability to navigate the challenges of its markets and execute on its strategic initiatives. While the company faces some market risks, its focus on customer intimacy, engineering excellence, and operational efficiency should continue to drive growth and shareholder value in the years ahead.