Moog Inc. (NYSE:MOG.B) Q3 2017 Earnings Conference Call - Final Transcript

Jul 28, 2017 • 10:00 am ET

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Moog Inc. (NYSE:MOG.B) Q3 2017 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Good day, and welcome to the Moog Third Quarter Fiscal Year 2017 Earnings Conference Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Ann Luhr. Please go ahead.

Executive
Ann Luhr

Good morning. (Forward-Looking Cautionary Statements)

Executive
John Scannell

Thanks, Ann. Good morning. Thanks for joining us. This morning, we report on the third quarter of fiscal 2017 and update our guidance for the full year. As usual, I'll start with the headlines before diving into the details.

First, it was another milestone quarter for our commercial aircraft business, with the Chinese C919 completing its first flight on May 5. Moog supplies the high lift system for this airplane. We also had some positive news in our marine energy business as we received our first significant FPSO order in several years. While we don't think our offshore business will rebound anytime soon, we believe this order signals that we have turned the corner on declining demand and can plan for more stable business going forward.

Second, it was another good quarter financially. Our operations delivered $0.91 per share, above our guidance from last quarter of $0.80 to $0.90. In addition, we had an unusually low tax rate, which added $0.20 per share. The result was earnings per share of $1.11, up 11% over last year.

Third, free cash flow in the quarter of $32 million was also strong.

Fourth, we completed the divestiture of our remaining small European space operations in early June. In addition, in July, we completed the divestiture of a nonstrategic product line, which we acquired as part of our Additive Manufacturing acquisition 18 months ago. There was no operating profit impact in the quarter from these disposals.

Finally, with 90 days left to go, we're updating our full-year guidance to sales of $2.46 billion, up $10 million; and earnings per share of $3.75, up from $3.50 per share last quarter.

Now let me move to the details, starting with the third quarter results.

Sales in the quarter of $626 million were up 2% from last year. Sales were up in Aircraft, Space and Defense and Components, but lower in Industrial Systems on weaker Wind Energy demand.

Walking down through the P&L. Our gross margin was slightly lower than last year, while our R&D expense was in line. Our SG&A expenses were down as a percentage of sales from the same quarter a year ago. Earnings before tax were down 6%, but our tax rate was an unusually low 17% compared with just over 30% last year. The overall result was net earnings of $40 million and earnings per share, as I said, of $1.11.

Let's go to 2017 outlook. We're fine-tuning our sales forecast this quarter to reflect the experience of the first nine months. Full year sales are now forecasted to be $2.46 billion, up $10 million from 90 days ago. The increase is in our Aircraft and Components groups.

We're increasing our earnings per share forecast by $0.25, a combination of $0.05 per