Release Date: April 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Moog Inc (MOG.A, Financial) achieved record sales and improved operating margins, reflecting strong financial performance.
- The company reported a 3% increase in revenue year-to-date compared to the prior year, with expectations for further revenue growth in the second half.
- Moog Inc (MOG.A) anticipates significant free cash flow generation in the latter half of the fiscal year due to optimized networking capital.
- The defense segment shows strong performance with increased budgets and alignment with key defense priorities, providing growth opportunities.
- Commercial aftermarket sales are robust, driven by strong fleet utilization and increased airline activity, contributing positively to margins.
Negative Points
- Tariff changes pose a significant risk, particularly affecting the import of steel and aluminum, and could impact operating profits by $10 million to $20 million.
- Commercial aircraft sales face challenges due to changes in Airbus' ordering patterns, leading to inventory pressures and potential cash flow impacts.
- Industrial sales decreased by 7% year-over-year, partly due to divestitures and purposeful product exits.
- Operating margins in the space and defense segment decreased by 330 basis points, influenced by the absence of last year's employee retention credit.
- The company faces uncertainties related to tariffs, which could affect various segments differently, with commercial and industrial segments being most vulnerable.
Q & A Highlights
Q: Can you provide the commercial OE revenue growth and aftermarket growth for the quarter?
A: The commercial OE for the quarter was about $135 million, and the aftermarket was $81 million. This compares to OE of $140 million last year and $67 million for the aftermarket.
Q: Can you elaborate on the changes in Airbus' ordering patterns and their impact on Moog?
A: Airbus has altered their ordering patterns, affecting our sales guidance for the A350. While commercial OE sales are down, this is offset by strong aftermarket performance. We expect inventory pressure in the back half of fiscal year '25, with recovery anticipated in FY26.
Q: How do you anticipate the impact of tariffs on your business, and what mitigation strategies are in place?
A: The commercial business is expected to see the highest impact from tariffs, followed by industrial, with minimal impact on space and defense, and negligible on military aircraft. We are utilizing the US-Mexico-Canada trade agreement and adjusting pricing strategies to mitigate tariff impacts.
Q: What is the outlook for cash flow generation in the second half of the year?
A: We anticipate strong cash flow generation in the second half, driven by improved collections on receivables and inventory management. We expect significant cash flow in the third quarter, with further improvement in the fourth quarter.
Q: How do you view the potential $1 trillion defense budget in relation to Moog's long-term outlook?
A: The potential increase in the defense budget reflects the necessary investment to address national security threats. This aligns with our capabilities and positions us well for future growth in defense-related programs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
