Moog Inc. CEO John Scannell was expecting this year to get off to a slow start.
But not this slow.
With its industrial markets weakening as the global economy cools and the plunge in oil prices causing its business in the energy sector to dry up, the company surprised investors by reporting a 26 percent drop in its first-quarter profits, which fell far short of analyst expectations.
Moog’s shareholders weren’t expecting it, either.
They showed their disappointment in the earnings by dumping Moog shares in a flurry of selling that pushed the company’s stock price down by 17 percent to a nearly three-year low.
By the end of the day Friday, the value of the company had dropped by roughly $330 million following a trading spurt that saw more than twice as many shares change hands as during a typical day.
And the outlook isn’t likely to get any brighter anytime soon.
John Scannell, Moog’s president and CEO, warned Friday that the outlook for the rest of the year isn’t any brighter for the Elma motion control equipment manufacturer.
Moog, which had been expecting its profits this year to jump by 19 percent, now predicts that its earnings will be flat at $124 million, or $3.35 per share.
Sales, which the company had predicted would rise by about 2 percent, now are forecast to be about $100 million lower than it expected, at $2.47 billion, and be about 2 percent lower than last year. The strengthening dollar accounted for about a quarter of the sales decline.
“We expected a slow start to the year and we came in at the low end of our guidance for the quarter,” Scannell said.
Moog’s shares fell by $8.82 to $46.33, the company’s lowest share price since April 2013.
Scannell said the company’s aerospace and defense markets, which account for most of the work done by the 2,600 employees at Moog’s Elma complex, have been holding up fairly well, while its industrial and energy markets have suffered.
“The vast majority of it is associated with the industrial slowdown and the price of oil,” Scannell said. “The slowdown in China and the fact that there is no pickup in Europe is filtering down to our business.”
“Over the past 90 days, the picture has worsened” for Moog’s industrial businesses, Scannell said.
During the first quarter, Moog’s profits tumbled to $26.2 million, or 71 cents per share, from $35.3 million, or 86 cents per share. The earnings were 11 cents less than the 82 cents per share that analysts were expecting.
Moog’s sales also fell well short of analyst forecasts, dropping by 10 percent to $568 million during the quarter that ended in early January, down from $630 million a year ago. Analysts had expected Moog’s sales to decline to $610 million.
Moog’s aircraft controls business, which accounts for nearly half of the company’s revenues, had a 4 percent decline in sales during the first quarter as both its commercial and military aircraft businesses softened. That caused the aircraft controls business’ operating profits by 26 percent. But Scannell said he expects that business to stabilize because Moog has won work on a series of new commercial and military aircraft projects that are ramping up production.
“We’re feeling good about that side of the business,” he said. “It’s the industrial side that’s not a pretty picture.”