The John Scannell era is off to a good start at Moog Inc.
Strong aircraft sales, partly the result of accelerated foreign shipments, helped Moog's first-quarter profits rise by 9 percent, easily topping analyst forecasts.
"We're off to a nice start," said Scannell, who succeeded Chairman Robert T. Brady as chief executive officer in December.
The improved profits came as Moog's sales grew by 8 percent to $600 million, which also was slightly stronger than analysts were forecasting.
Moog executives said they now expect the company's sales for the current fiscal year, which ends in September, to be almost 2 percent lower than they originally predicted because of weaker foreign currencies and a slightly lower industrial sales forecast. Still, the company expects its sales for the year to reach $2.48 billion, which is still 6 percent more than last year but less than the $2.52 million the company originally forecast.
Moog did not change its earnings forecast for the full fiscal year, which remains at $152 million, or $3.31 per share.
Scannell said the proposed U.S. defense budget released Thursday left Moog's most important military programs -- from the V-22 tilt-rotor aircraft to the F-35 Joint Strike Fighter and the Blackhawk helicopter -- relatively unscathed, although the F-35 production will be stretched out.
"We're fairly comfortable with what's come out," he said.
During the first quarter, Moog earned $36.4 million, or 80 cents per share, which was better than the $33.4 million, or 73 cents per share, that it earned a year ago. Analysts had expected the company to earn 74 cents per share.
Moog's sales improved from $554.4 million a year ago and were $4 million better than the $597 million in revenues analysts were expecting.
Most of the improved profits came from Moog's aircraft controls business, where operating profits jumped by 23 percent to nearly $25 million. The unit's sales strengthened by 18 percent to $231 million, as military aircraft revenues increased by 19 percent because of gains in the Joint Strike Fighter program and the accelerated foreign sales. Commercial aircraft sales grew by 16 percent because of higher sales for the new jets being produced by Boeing Co. and Airbus.
"We had nice growth in the military side and nice growth on the commercial side," Scannell said.
Moog's medical device business, which has struggled for the last few years, rebounded in the first quarter to earn $1.6 million -- a sharp turnaround from its $1.5 million loss a year ago. Medical device sales grew by 7 percent to $35 million, bolstered by a 14 percent jump in revenues from medical pumps and a 5 percent rise in the sale of the administrative sets that are needed with each use.
"I'd say the business is on plan," Scannell said. "This is the third quarter of nice, solid sales."
Most of the issues that have hurt the medical device business in recent years -- from start-up troubles at its new plant in Costa Rica to a costly pump software recall -- have been largely resolved. One lingering issue is the medical device unit's development of a direct sales force and non-exclusive outside sales representatives, a process that involves training that likely will take a couple of more quarters to complete, Scannell said.
Earnings from Moog's industrial business grew by 10 percent to $15.8 million as sales also strengthened by 10 percent to $158 million. The unit had strong revenues from its simulation and test systems products, which offset lower revenues from industrial automation products.
Operating profits from the company's component group inched up by 2 percent to $15 million on a 2 percent rise in revenues to $88 million.
The weak spot was Moog's space and defense controls business, where earnings dropped by 19 percent to $12.7 million. The unit's sales fell by 8 percent to $88 million as revenues from its Drive Vision Enhancer systems declined.