Moog's Control Electronics Platform for launch vehicles and spacecraft avionics. Image source: Moog Inc.

Moog Inc. (NYSE:MOG.A)(NYSE:MOG.B) released fiscal third-quarter 2016 results late last week, and shares are up more than 7% since then despite continued top-line declines, and a slightly reduced revenue outlook from the precision-control components and systems maker. Let's take a closer look at how Moog kicked off the second half of its fiscal year.

Moog results: The raw numbers


Fiscal Q3 2016 Actuals

Fiscal Q3 2015 Actuals

Year-Over-Year Growth


$613.3 million

$634.5 million


Net income (attributable to common shareholders)

$36.3 million

$36.3 million


Net income per diluted share




Data source: Moog Inc.

What happened with Moog this quarter?

  • Earnings were ahead of both the expectations of Moog and Wall Street; analysts' consensus estimates called for net income of $0.88 per share.
  • Generated cash flow from operations of $82 million.
  • Aircraft-controls sales climbed 1% year over year, to $274 million, including:
    • 8% growth in commercial aircraft sales, to $140 million.
    • 45% growth in OEM products sales to Airbus, to $28 million, driven by the A350 production ramp.
    • A 13% increase in Boeing OEM product sales, to $66 million, with increased sales across all platforms.
    • A 12% decline in commercial aftermarket revenue, to $27 million, due to lower initial provisioning of 787 spares, and softness in the business jet market.
  • Military aircraft sales declined 5% year over year, to $134 million, including:
    • A 6% decline in OEM sales, to $84 million, on lower V-22 tilt rotor and Black Hawk helicopter sales.
    • 7% growth in F-35 production sales.
    • Higher F-35 aftermarket sales driven by increased depot repairs.
    • A 4% drop in military aftermarket sales, to $50 million, driven by the winding down of the C-5M Super Galaxy upgrade program.
  • Space and defense sales fell 5% year over year, to $91 million, including:
    • An 8% decline in space sales, to $44 million, on lower avionics and components sales.
    • A slight decline in defense sales, to $47 million, on lower military-vehicle sales.
  • Industrial-systems sales remained flat from the same year-ago period, at $130 million, including:
    • 8% growth in energy market sales, to $33 million, driven by wind-energy products sold into Europe and China.
    • A 3% drop in industrial automation sales, to $69 million.
    • A 3% decline in simulation and test sales, to $28 million, primarily due to a difficult year-over-year comparison given unusually strong test sales in last year's Q2.
  • Components sales fell 18% year over year, to $92 million, including:
    • A 14% decline in aerospace and defense components, to $42 million.
    • Continued softness on a broad basis across the energy, industrial, and medical markets.
  • Medical-devices revenue rose 1% year over year, to $26 million, driven by higher sales of enteral pumps and administration sets. Excluding the divested life sciences business, organic growth in medical devices was 8%.

What management had to say

Moog CEO John Scannell stated:

Overall, we had a good third quarter. Sales were slightly down, but EPS was ahead of our guidance and we had strong cash flow. In addition, our aircraft team celebrated the flawless operation of our flight controls as part of the successful first flight of the Embraer E2 jet. With one quarter left to go, we're refining our sales forecast for the year, while keeping our EPS forecast unchanged from 90 days ago.

Looking forward

More specifically on guidance, Moog now anticipates full fiscal-year 2016 revenue of $2.42 billion -- down from previous guidance of $2.47 billion -- and earnings in the range of $3.35, plus or minus $0.10 per share, compared to $3.35, plus or minus $0.15 per share previously.

Apart from its light top line and slight revenue-guidance reduction, Moog's latest report offered very little in the way of surprises. Meanwhile, investors are rightly happy that the company's continued focus on cost management has allowed its profitability to expand. Over the long term, as those revenue headwinds abate, shareholders should continue winning as Moog emerges a stronger company for it.

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