Moog Keeps Flying Skyward

The aerospace business has done extremely well lately, and Moog (NYSE: MOG-A) (NYSE: MOG-B) has profited from the success of the sector through selling precision components and systems that go into a wide variety of different aircraft. Although Moog does work for industrial manufacturers and for the space and defense industry, aerospace has been a key driver for the company in recent years.

Coming into Friday's fiscal fourth-quarter financial report, Moog investors wanted to see continued growth from the company, and Moog's results were even better than most had anticipated. Let's take a closer look at Moog to see how it did and what's ahead for the company.

Moog gains more altitude

Moog's fiscal fourth-quarter results continued favorable trends that we've seen all year from the company. Revenue growth of 5% yielded sales of $649 million, which was much better than the roughly breakeven performance on the top line that most investors were expecting to see. Net income jumped 16% to $38.6 million, and that produced earnings of $1.07 per share, which topped the consensus forecast among those following the stock of $0.95 per share.

Most of Moog's revenue strength came from the aerospace and components area. The aircraft controls segment saw revenue climb 7%, making up more than half of the company's total sales gains. Components saw an even better percentage rise of nearly 10%. The space and defense controls unit inched higher by about 3%, leaving only the industrial systems division to suffer a modest sales decline of 3%.

Operating profit rose in all of Moog's businesses. The biggest gains came from space and defense, which saw its segment bottom line jump by two-thirds from year-ago levels. Aircraft controls also rose at a healthy double-digit percentage clip, leaving more modest gains for the industrial systems and components divisions.

Moog continued to benefit from strength in the commercial airliner market. Sales to key original equipment manufacturers were up substantially, driven by strong sales of the A350 and 787 Dreamliner aircraft. The commercial aftermarket segment also performed well. F-35 fighter production helped push military aircraft sales higher, although military aftermarket performance struggled from lower activity on the V-22 Osprey. Defense sales climbed on military vehicle applications, but divestitures sent space-related revenue down despite solid performance in avionics products. Lower sales of energy and industrial automation products held back the industrial segment, although simulation and test sales cushioned the blow to the segment.

Can Moog fly higher?

CEO John Scannell generally let the press release speak for itself. "After several years of restructuring and cost-cutting," Scannell said, "our business is turning up, and our focus has shifted to growth." The CEO noted that operating margin for the business finished at its best levels of the year.

Moog is also optimistic about its future prospects. Scannell said that he expects to see growth and related margin expansion continue in fiscal 2018. In terms of formal guidance, Moog believes that 2008 sales will be up 5% to $2.62 billion, with earnings per share in a range between $3.90 and $4.30. Those numbers were generally consistent with the results that investors had expected from the company.

Investors should also prepare for a change to Moog's organizational structure. Going forward, the company will wrap results from the components segment into their respective places in the other three categories, with industrial and medical products going to industrial systems and most other results getting included in the space and defense segment.

Moog shareholders weren't entirely satisfied with the company's overall performance, and the stock sagged by about 3.5% on Friday after the announcement. After having risen by as much as 25% just since June, it's likely that the stock decline simply reflected a natural pullback rather than suggested any future pause in the impressive growth that Moog has posted recently.

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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Moog (A shares). The Motley Fool has a disclosure policy.