Moog Inc. chief executive Robert T. Brady isn't cowering over the threat of a recession.
The Elma aerospace company's profits jumped by 18 percent during its fourth quarter, and Moog officials are responding to the steep plunge in the stock market by launching a plan to buy back up to 1 million of its shares, which are down nearly 40 percent since mid-September.
While Moog's earnings matched analyst forecast, the company warned Thursday that its profits during the fiscal year that started this month won't be quite as strong as company officials initially forecast.
With the company expecting a "challenging economic period" during the current fiscal year, Moog reduced its profit forecast to $132 million to $136 million, or roughly $3.08 per share, down from its July forecast of $134 million to $140 million, or roughly $3.14 per share. The company also trimmed its sales forecast to slightly more than $2 billion, down from its earlier estimate of $2.1 billion. The forecast still calls for a 6 percent increase in sales and a 12 percent rise in earnings.
Brady said the company's broad array of products, which stretch from the the aviation industry to industrial components and medical products, "provides us with a very strong hand to play."
"Even if there is a recession that's something short of crumbling, it's not likely to have a broad effect on our company," he said. "The majority of our business is in markets that are not likely to be affected by a consumer-driven recession."
Investors reacted favorably, pushing Moog's shares up $2.20 to close at $33.48.
Brady predicted that the company's aerospace and defense business would not be affected by a slowing economy, while its medical devices and many of its industrial products also would experience "very little recessionary impact." The company's order flow has been holding up, while its backlog of orders was up 11 percent at the end of September, Brady said.
Yet Moog's stock has taken a beating, along with the rest of the stock market, which is why the company also approved a program to buy back up to 2.3 percent of its shares. "At these prices, we do think it's an irresistible investment," Brady said.
Moog also continues to be on the hunt for acquisitions, especially if the fears about the economy drive down asking prices -- something that Brady said hadn't yet happened in some of its markets, especially within the aerospace industry.
"There are a number of things to feel good about," Brady said. "For one thing, we don't need money. We have lots of available credit," with more than $500 million in cash and accessible borrowing capacity at a time when credit markets are tight.
For the fourth quarter, Moog's profits rose to $31.6 million, or 73 cents per share, from $26.8 million, or 62 cents per share, a year ago. Sales rose 19 percent to $491 million during the quarter that ended in September, up from $ $413 million a year earlier.
Earnings improved in Moog's industrial products, components and space and defense controls businesses, offseting lower operating profits at its aircraft controls and medical device units.
Brady said Moog executives are interested in broadening its medical products offerings, possibly to include intervenous pumps for the hospital market that would complement the IV pumps it currently makes for outpatient clinics. The company also is looking to bolster the medical products business' international sales.
"We're now convinced we need a broader [medical] product line" Brady said. "We're working on that."