Moog Inc. (NYSE:MOG.A) (NYSE:MOG.B) has a funny name and kind of a weird stock ticker. Depending on the financial data service you use, and the class of stock your provider thinks you're looking for, you might find Moog shares listed as "MOGA," "MOGB," "MOG-A," or "MOG-B." But strange as the name and tickering may be, Moog stock's earnings report this morning wasn't strange at all.
In fact, it was kind of terrific.
Reporting earnings for its fiscal first quarter 2020 this morning (yes, even Moog's calendar is a little off-ordinary -- most companies are still reporting fourth quarter 2019 results right now), Moog described a quarter of strong sales growth, expanding profit margins on those sales, and consequently, terrific earnings growth.
Sales in Moog's fiscal first quarter jumped 11% in comparison with Q1 2019 results, topping out at $755 million and well ahead of consensus expectations for less than $717 million in revenue. Operating profit margins expanded by 30 basis points to an even 12%. As a result, earnings growth outpaced sales growth, and Moog reported a per-share diluted profit of $1.44 -- 18% growth year over year.
$1.44 per share was, by the way, also more than Wall Street analysts expected. Yahoo! Finance data show that the consensus expectation going into earnings day was for Moog to earn just $1.21 per share, meaning Moog "beat earnings" by a whopping 19%. And yet, seeing these numbers, investors are bidding up Moog stock by only about 1% today.
Why not more?
After all, Moog notched strong sales gains in two of its key markets for precision control products. Total aircraft controls sales increased 12% year over year, and space and defense sales -- Moog's strongest business with an operating margin of 13%, according to data from S&P Global Market Intelligence -- showed the strongest growth of all, rising 19%. Only industrial systems sales fell short, and even there, Moog posted a respectable 4% sales gain.
So why didn't Moog shares move more in response to this good news?
I blame guidance.
The one number that's holding Moog stock back
After revealing all the good news about Q1 2020, Moog proceeded to dribble a bit of cold water over expectations for the rest of this year. In updated guidance, Moog predicted full-year fiscal 2020 sales will top out at $3 billion, slightly underperforming analyst expectations for $3.02 billion this year.
Earnings on those sales could also disappoint. Moog said its profits for the year will be about $5.50 per share, plus or minus $0.20. Because analysts are looking for $5.52 per share on average, this prediction too appears to forecast an earnings miss -- and I think it's the primary reason Moog stock isn't performing better after today's earnings beat.
Moog's guidance is especially disappointing because, all else being equal, if Moog "beat earnings" by $0.23 per share in Q1, you would ordinarily assume it would likewise beat earnings for the year by at least $0.23 per share. Ideally, it would beat by more than that, but $0.23 would be a good baseline for showing that first-quarter performance was more than a fluke.
The fact that Moog is saying instead that it will earn less than the Street is predicting, conversely, suggests that Moog's momentum in the first quarter is going to fade as the year progresses -- much like investors' enthusiasm for Moog stock is doing today.