Moog — a supplier to Boeing, Airbus and Lockheed Martin — is Thursday's IBD Stock Of The Day as the aerospace and defense stock that long flew under the radar has turned into a first-class ticket. Moog's ascent, after five years of going nowhere, really began after management unveiled a plan to elevate margins at a June 2023 investor day.
Moog Business
In reporting fiscal third-quarter results on Aug. 2, Moog bumped up its full-year outlook. It forecast 8% sales growth to $3.575 billion and a 20% EPS gain to $7.40. Its outlook for adjusted operating margin expanded by 150 basis points to 12.4%.
About 50% of sales come from space and defense, including military aircraft, with 20% coming from supplying commercial aircraft. The final 30% of sales come from industrial and medical industries.
Moog supplies advanced primary flight controls on the most modern military aircraft. That includes the Lockheed Martin F-35 Lightning II and the Future Long Range Assault Aircraft program, or FLRAA.
Speaking at a recent Gabelli investors conference, CEO Patrick Roche explained, "FLRAA is an aircraft that can take off as a helicopter and then fly as a plane. So it has actuation that allows it to tilt the rotors." He added: "So it's got a pretty complex set of systems in there. And we're involved in all of those control systems."
Moog also supplies primary flight controls for the Boeing 787 and Airbus A350 widebody aircraft, as well as business and regional jets from Embraer and Gulfstream, owned by General Dynamics.
Boeing Supplier Levels Up Margins
Moog laid out a plan at the June 2023 investor day to improve operating margins by 100 basis points a year, from 10% to 13%. The strategy combined pricing — a new focus on exacting price increases from customers where possible — and simplification. The latter includes a focus on the 80/20 rule that 20% of actions produce 80% of results.
Roche explained at a Morgan Stanley Aerospace and Defense conference on Sept. 12 that his firm is reshaping its portfolio and "pruning" businesses that don't yield synergies and fit its strategic alignment.
Once-In-A-Generation Opportunities
Roche said at the Morgan Stanley conference that Moog also is selectively investing in "once in a generation" opportunities.
The company's four major platforms are the 787, A350, Joint Strike Fighter (F-35 Lightning II) and Reconfigurable Integrated-weapons Platform for ground-combat vehicles, Roche said. "I look forward positively to maybe in the late 2020s, early 2030s, where we would have another handful of such significant programs for us because we have that type of activity going on today within the organization."
MOGA Stock
Moog rose 2.3% to 203.58 in Thursday stock market action. The move carried the aerospace and defense stock past a 200.92 buy point from a seven-week consolidation, according to a MarketSurge analysis. Arguably, Moog stock was actionable Wednesday when it cleared the Aug. 30 short-term high of 197.73.
MOGA has doubled since the June 2023 investor meeting.
The stock carries a 96 IBD Composite rating out of a possible 99, according to IBD Stock Checkup. The rating combines a range of fundamental and technical factors.
Moog, Boeing, Lockheed Martin, Airbus, Embraer and General Dynamics are all part of the Aerospace/Defense group. That's ranked 21 out of 197 industry groups.
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