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Moog Rides the Aerospace Wave Higher

The rise in aerospace has benefited many companies, and Moog (NYSE: MOG-A) (NYSE: MOG-B) has counted on its aircraft and space-systems businesses to help carry the load in a sluggish environment for the broader industrial sector. Coming into Friday's fiscal first-quarter financial report, Moog investors believed that the company would be able to produce growth in revenue and profit, and the company did even better than most expected. Let's look more closely at Moog and what its results say about the coming year.

Image source: Moog.

Moog climbs back into growth mode

Moog's fiscal first-quarter results gave investors everything they were looking for and then some. Revenue was up 4% to $589.7 million, which was better than the consensus forecast among those following the stock of $583 million. Net income produced even stronger growth of 16%, and that resulted in earnings of $0.84 per share, $0.04 better than what investors had expected to see.

Taking a closer look at Moog's performance, the maker of precision control components and systems went back to its best-performing areas over the past few years to generate the most growth. The commercial aircraft segment saw a 5% rise in revenue, due largely to a 40% jump in sales of original equipment manufacturer products to Airbus in its A350 program. However, Boeing still accounts for nearly double Moog's revenue compared to Airbus, despite having flat sales for the quarter.

The space and defense segment did even better. Segment revenue was up 11%, with space, in particular, rising 13% on sales of space avionics and satellite engines. Ground vehicle, missile, and naval products sent defense revenue up 10%. Moreover, the components segment also saw double-digit percentage growth on the top line, showing gains not just in aerospace and defense components but also in the company's medical market and industrial products niche.

Still, the industrial systems segment continued to lag. Weakness in simulation and testing, industrial automation, and energy-related applications sent segment revenue down 10% from year-ago levels.

Things looked a little different in terms of segment profitability. Components and aircraft controls led the way higher, with bottom-line gains of 44% and 25% respectively. But the space and defense controls segment suffered a profit drop of nearly two-fifths, and industrial systems operating profit fell by more than 20%.

CEO John Scannell was happy with Moog's results. "It was a good start to the year, and it puts us on track for our full year guidance," Scannell said. "Most of our businesses have stabilized since this time last year, and we are seeing positive results from restructuring and our portfolio reviews of the past few years." The CEO also took pride in noting that earnings came in better than Moog had originally forecast.

Can Moog keep up the pace?

Moog also has plenty of room for further growth. The company reported a backlog of $1.2 billion, which works out to about six months' worth of revenue at Moog's current run rate. If weak areas like energy start bouncing back, then renewed industrial strength could add to the success that the company has seen on the aerospace front.

However, Moog did pull back slightly on its guidance for fiscal year 2017. The company cut its revenue expectations by $20 million -- now believing that it will bring in sales of $2.42 billion. Moog did keep its $3.50 per share earnings forecast intact, with an implied range of $3.30 to $3.70 per share based on its estimate.

Even with the guidance concerns, Moog investors seemed pleased with the news, sending the stock up 3% in Friday morning trading following the announcement. If aerospace continues to provide such an important boost to its fundamental business, then Moog will be positioned to do even better once the cyclical industrial economy starts to fire on all cylinders again.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Moog (A shares). The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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