Moog Q3 Earnings Call Highlights

Record quarter: Moog’s fiscal Q3 2026 sales rose 15% year over year to $1.1 billion, while adjusted EPS increased 60% to a record $3.72. Results benefited partly from a $30 million tariff refund, but underlying sales growth also drove stronger performance across all four segments. Growth opportunities expanded: Industrial revenue grew 18%, supported by data-center cooling pumps, which are expected to generate nearly $100 million in fiscal 2026 revenue. Defense demand also remains strong, with missile-program revenue projected at about $275 million, more than 20% above the prior year. Outlook raised: Moog increased fiscal 2026 guidance for revenue, adjusted operating margin, adjusted EPS and free-cash-flow conversion. Adjusted EPS guidance rose by $1.05 to $11.65, while free-cash-flow conversion is now expected to reach approximately 70%.

Moog NYSE: MOG.A reported record third-quarter fiscal 2026 sales of $1.1 billion, up 15% from a year earlier, as demand increased across its aerospace, defense and industrial businesses. The company also said its 12-month backlog rose 23% year over year and generated $133 million of free cash flow during the quarter. Adjusted earnings per share reached a record $3.72, up 60% from the prior-year quarter. Chief Financial Officer Jennifer Walter said roughly half of the increase reflected stronger underlying business performance, primarily from higher sales, while the other half was attributable to tariff refunds. The quarter included a $30 million operating-profit benefit from the recovery of previously paid IEEPA tariffs, equivalent to 270 basis points of operating margin and approximately $0.70 per share. Moog also completed a review of its domestic research and development tax credit, resulting in a $35 million prior-year benefit that was excluded from adjusted results, along with an $8 million one-time tax benefit tied to legal-entity simplification and $13 million of simplification-related charges.

Sales increased in each of Moog's four business segments. Space and Defense revenue rose 17% to $336 million, supported by broad defense demand, particularly for missile controls and space vehicles. Military Aircraft sales increased 9% to $245 million as repair and overhaul activity, spare-part sales and activity on the MV-75 program increased. Commercial Aircraft sales rose 17% to $254 million, driven by increased production-program volume, pricing on certain major programs and strong aftermarket sales. Industrial revenue increased 18% to $282 million, with about half of the growth coming from the rapidly expanding data-center cooling market. Medical-device and energy markets also contributed to Industrial growth. Space and Defense adjusted operating margin was 15.7%, up 150 basis points year over year. Military Aircraft adjusted operating margin was 14.7%, up 290 basis points. Commercial Aircraft adjusted operating margin was 15.2%, up 50 basis points. Industrial adjusted operating margin was 19.9%, aided by data-center cooling pump growth and the tariff refund. Consolidated adjusted operating margin was 16.4%, up 280 basis points from the prior-year quarter. Walter said that, excluding both the tariff refund and a prior-year benefit from the sale of a non-core Commercial Aircraft product line, operating margin improved 80 basis points.

Demand for data-center cooling pumps is being driven primarily by one hyperscale customer through two cooling distribution unit manufacturers. The business is expected to grow from about $25 million in fiscal 2025 revenue to nearly $100 million in fiscal 2026, representing...