Moog NYSE: MOG.A reported what management repeatedly described as an “outstanding” second quarter for fiscal 2026, citing double-digit revenue growth, record backlog, higher operating margins, and earnings per share that exceeded its prior guidance. Executives also highlighted strong demand across defense and aerospace markets, continued progress on operational simplification efforts, and an updated full-year outlook that raises sales and adjusted earnings per share expectations.
Quarterly performance driven by growth across all segments
Chief Executive Officer Pat Roche said the company posted “double-digit revenue growth relative to prior year” and delivered “record adjusted earnings per share” on the back of “strong growth and improved adjusted operating margin.” Roche also said Moog set records for both total backlog and 12-month backlog, with the 12-month figure up 33% from the prior year.
Chief Financial Officer Jennifer Walter reported second-quarter sales of $1.1 billion, up 13% from the prior-year period, with growth in each of Moog’s segments. Walter said the largest sales increase came from space and defense, where revenue rose 16% to $314 million, reflecting “broad-based defense demands” with “particularly strong” demand for space vehicles and missile controls.
Commercial aircraft sales increased 15% to $247 million, which Walter attributed to “higher volume and pricing on some of our major production programs.” Military aircraft sales climbed 10% to $235 million, and Walter noted activity increased on the MV-75 program, reaching “peak levels for the current development phase earlier than we had planned.” Industrial sales rose 9% to $256 million, with Walter citing the “expanding data center cooling market” and foreign currency effects.
Margins improve despite tariff headwinds
Walter said adjusted operating margin was 13.4% in the second quarter, up 90 basis points from a year earlier. She added that results included “100 basis points of pressure from tariffs,” and that “excluding this pressure, all of our segments were up nicely.”
By segment, Walter reported:
- Space and Defense: 14.6% operating margin, up 200 basis points, driven by “profitable sales growth,” partially offset by higher investments in product development, business capture, and readiness.
- Military Aircraft: 13.7% operating margin, up 170 basis points, benefiting from profitable sales growth.
- Commercial Aircraft: 11.9% operating margin, slightly above the prior year, with pricing benefits offset by tariffs.
- Industrial: 13.2% operating margin, “just below” the year-ago period.
Walter also said Moog took $3 million of charges during the quarter—largely tied to simplification activities and footprint rationalization—that were excluded from the adjusted operating profit figures discussed on the call.
Free cash flow positive, refinancing extends maturities
Walter said Moog generated “nearly $100 million of free cash flow” in the second quarter, bringing year-to-date performance into “solid positive territory” and ahead of internal expectations. She said Moog held working capital “relatively constantly” despite higher sales, with inventory growth “largely offset by customer advances.” Capital expenditures were “somewhat below” the quarterly average over the past year but are expected to increase later in the year as Moog invests in facilities to support growth opportunities, including space and defense programs and commercial aircraft operational initiatives.
Walter also outlined refinancing actions completed during the quarter. Moog amended its $1.1 billion revolving credit facility and $250 million term loan to extend maturities to five years, and issued $500 million of 5.5% senior notes maturing in 8.5 years. The proceeds were used to call 4.25% notes that were set to mature in under two years, redeemed just after quarter end. Walter said the refinancing was contemplated in prior guidance and did not materially change the company’s outlook.
At quarter end, Walter said leverage was 1.8x, “just below the target leverage of 2–3x,” and reiterated that capital deployment priorities center on organic growth, with strategic acquisitions pursued as appropriate.
Defense demand, missiles, and capacity investments in focus
Roche spent a significant portion of the call discussing what he called a “structural shift in the defense market.” He said the Middle Eastern war has increased urgency to boost U.S. defense industrial manufacturing capacity, resulting in increased spending requests and “alternative procurement strategies” to align resources across the defense industrial base.
Responding to a question about missile controls demand, Roche pointed to ramp expectations on major programs and said production rates on key missile defense programs are anticipated to increase “by factors ranging from two to four times over the next few years.” He cited PAC-3 as an example, describing an increase from 650 missiles per year to “a level of 2,000 per year.” Roche said Moog has been preparing for higher demand, including freeing floor space at its Salt Lake City facility and investing in new capabilities to support increased missile program output.
Roche also told Morgan Stanley’s Kristine Liwag that Moog’s operational performance is helping it compete for additional content, citing “100/100” delivery performance in missiles—“100% on time, 100% quality”—and said that operational performance can help the company win business in an environment where primes are constrained by capacity.
Commercial aerospace demand solid; inventory actions affect guidance timing
In commercial aerospace, Roche said customer demand remains strong with consistent signals of higher production rates, while noting that higher fuel costs could alter airline behavior. He said higher fuel costs “may result in a shift to more fuel-efficient aircraft and a reduction in some operating routes,” but said Moog expects its platform exposure and aftermarket position to support its plan.
Roche also acknowledged operational steps taken in response to the Middle Eastern war, including shutting down two forward stocking locations in the Middle East and servicing those needs from elsewhere.
Moog’s updated annual outlook included a reduction in commercial aircraft sales guidance, which Walter and Roche described as a deliberate inventory management decision rather than a demand change. Answering TD Securities’ Gautam Khanna, Walter said Moog is “making a deliberate decision so that we are not bringing in materials ahead of when we need it,” which reduces near-term revenue recognition under cost-to-cost accounting. She emphasized that demand has not changed for major platforms, stating, “There’s strong demand for the aircraft,” and clarified the timing decision is “by Moog, not by the OEM customer.” Walter said pushing out material receipts benefits cash flow.
Looking to the full year, Roche said Moog updated fiscal 2026 guidance to reflect strong first-half performance and a more positive market outlook, raising sales and adjusted diluted earnings per share while holding adjusted operating margin and free cash flow conversion expectations unchanged. Walter said the company increased sales guidance for space and defense, industrial, and military aircraft, while lowering commercial aircraft guidance by $20 million due to the inventory timing decision. She also said Moog now expects 110 basis points of tariff pressure in fiscal 2026, up 30 basis points from prior guidance, driven by higher industrial activity that is more tariff-sensitive.
Walter raised adjusted earnings per share guidance by $0.40 to $10.60 ± $0.20 and forecast third-quarter EPS of $2.65 ± $0.10. The company maintained its free cash flow conversion outlook of about 60% and said it expects next quarter’s free cash flow conversion to be about 100%.
About Moog NYSE: MOG.A
Moog Inc designs, manufactures, and integrates precision motion and fluid controls and controls systems for original equipment manufacturers and end users in the aerospace, defense, and industrial markets worldwide. The company's Aircrafts Controls segment offers primary and secondary flight controls for military and commercial aircrafts; aftermarket support services; and ground-based navigation aids. Its Space and Defense Controls segment provides controls for satellites, space vehicles, launch vehicles, armored combat vehicles, tactical and strategic missiles, security and surveillance, and other defense applications; and gun aiming, stabilization, and automatic ammunition loading for armored combat vehicles.
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