Moog Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights: - Strong financial results with record sales, improved operating margin, and earnings per share. - End markets: Defense businesses strong with DoD budget increase and alignment with defense priorities; Commercial Aerospace customers have strong order books but struggle with production throughput; Industrial market outlook stable. - Innovation initiatives: Showcased METEOR satellite, TerraTech solutions, CURLIN 8000 infusion pump; continued Voice of the Customer activities to strengthen customer relationships. - Financial strength: Embedding 80/20 strategy to simplify business, address operational challenges, and enhance profitability through inventory reduction, supply chain simplification, and segmented P&L analysis.

Segment Performance: In the second quarter, sales were $935 million. Military Aircraft sales were $214 million, up 6% y/y. Commercial Aircraft sales were $216 million, up 4%, with strong aftermarket but some business jet/narrow-body program sales down. Space and Defense sales were $270 million, up 1% and at a record level. Industrial sales were $234 million, down 7% due to divestitures and product exits. Revenue year-to-date is up 3%, with Defense businesses expecting revenue increase in second half, Industrial steady, and Commercial slightly down. Adjusted operating margin excluding Employee Retention Credit up 40 basis points year-to-date.

Guidance: Reiterates sales projection of $3.7 billion, adjusted operating margin of 13.0%, and adjusted EPS of $8.20 ± $0.20. Projects free cash flow near low end of prior range due to Airbus ordering pattern impact, but expects strong cash generation in back half. Estimates potential $10M-$20M net pressure on operating profit guidance for FY '25 from tariffs. Projects Q3 EPS at $2 ± $0.10.

Risks: Tariffs on steel, aluminum, imports from Costa Rica, Mexico, EU, etc. pose potential impact on business. Uncertainty around tariff landscape, including retaliatory tariffs, second-order effects, and non-tariff trade constraints.

Question and Answer: Q: Michael Ciarmoli asked about Commercial OE revenue growth, A350 details, and cash flow.

A: Jennifer Walter responded on Commercial OE and aftermarket figures, A350 inventory timing, and cash flow drivers.

Q: Kristine Liwag inquired about tariff exposures and pain sharing with customers.

A: Patrick Roche discussed tariff exposures in Commercial, Industrial, and Space/Defense businesses and mitigation efforts.

Q: Jon Tanwanteng asked about 787, next-gen programs, and defense budget.

A: Patrick Roche addressed 787 production timing, next-gen program exposure, and defense budget implications.

Q: George Bancroft questioned about tariff exemptions.

A: Patrick Roche mentioned ongoing tariff negotiations and potential carve-outs.

Q: Ed Keller asked about Commercial aftermarket and tariff risk.

A: Jennifer Walter spoke on strong Commercial aftermarket repair activity, and Patrick Roche detailed tariff exposures in steel, aluminum, and specific countries