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Moog's Recession is Over, CEO Says

Profits nearly doubled from one year ago

By David Robinson

August 01, 2010 

 Moog Inc. chief executive Robert T. Brady is convinced the worst is over for the Elma motion control equipment maker.

"Things are looking good," said Brady, Moog's chairman and chief executive officer on Friday, after the company reported better-than-expected third-quarter earnings. "Our recession is over, even if it's tempting the gods."

Fueling Brady's optimism was a strong third-quarter performance by Moog, whose profits shot up by 84 percent as its aircraft business strengthened, pushing sales up by 21 percent.

The earnings beat analyst forecasts by a penny per share, and Brady said he expects the improvement to continue into next year. The company forecast that sales will rise by 7 percent during the fiscal year that starts in October, with profits increasing by 15 percent.

"We're feeling pretty good about that. This is not a wild stretch," Brady said. "The aircraft business is strong. Our components group had an amazing quarter."

Moog's profits during the third quarter improved to $29.2 million, or 64 cents per share, during the quarter, up from $15.9 million, or 37 cents per share, a year ago, and better than the 63 cents per share that analysts were expecting.

The company's sales rose to $537 million during the quarter that ended in June, up from $445 million a year ago, as aircraft sales jumped by 18 percent, fueled largely by Moog's acquisition of General Electric's actuation business in Great Britain.

Moog's industrial business also strengthened, with sales jumping by 26 percent and operating profits returning to a more normal level of more than $12 million after being slightly better than break-even a year ago. "It seems to be moving in the right direction," Brady said.

The company's components business also increased its earnings by 25 percent on a 6 percent rise in revenues.

Moog's medical products business continued to lose money, but managed to reduce its losses by more than 80 percent to $683,000 as sales rose by 29 percent.

Still, Brady said the medical products business is being dragged down by start-up problems at the company's sprawling assembly plant in Costa Rica, which had been having unexpected trouble training its 325 new employees how to put together the more than 40 plastic assemblies produced at the factory.

"It's relatively simple work, but it's got to be done right," he said. "We still have a substantial cost problem there."

Moog reaffirmed its earlier forecast that earnings this year would be around $107 million, or $2.35 per share, on sales of nearly $2.09 billion.

In the fiscal year starting in October, Moog said it expects to earn $124 million, or $2.70 per share, on sales of $2.24 billion.

"Sales are strong and continue to grow," Brady said. "Our major aircraft development programs are moving into production. Space and defense and the components group are having a very strong year. Sales are improving in both industrial and medical."

Moog has more than 10,000 employees globally, including just under 2,800 locally.