Long-Term Defense Backlog And Space Programs Will Support Powerful Future Upside

Catalysts

About Moog

Moog supplies motion control, actuation and related systems across space and defense, commercial and military aircraft, and industrial markets.

What are the underlying business or industry changes driving this perspective?

• Record total and 12 month backlog, with the 12 month backlog up 33% year on year, provides multi year visibility on space, defense and aircraft programs and can support higher revenue and earnings resilience as this backlog converts to sales.
• Structural shift in global defense spending, including multi year missile production agreements with rates targeted at 2 to 4 times current levels, such as PAC 3 moving from 650 to 2,000 missiles per year, can support sustained growth in missile control actuation volumes and margin uplift as Moog leverages existing facilities and 100% on time, 100% quality delivery performance.
• Exposure to higher content on modern wide body aircraft like the 787 and A350, combined with customer focus on more fuel efficient fleets, positions Moog to benefit from higher hours flown and ongoing OEM production plans, which can support commercial aircraft revenue and contribute to operating margin through pricing and scale.
• Growing space activity, including Moog roles on Artemis II, thrust vector control across SLS stages, Orion light control systems and avionics and actuation for commercial and defense launch vehicles and space vehicles, aligns the company with long duration programs that can support Space & Defense sales and earnings over many years.
• Rising data center cooling pump demand and broader industrial stability, together with Moog’s investments in capacity, automation and focused factories, can support industrial segment revenue growth while 80/20 simplification, tariff mitigation and supplier consolidation help protect or improve operating margins and free cash flow.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more optimistic perspective on Moog compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Moog's revenue will grow by 7.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 8.7% today to 7.4% in 3 years time.
• The bullish analysts expect earnings to reach $397.4 million (and earnings per share of $12.64) by about September 2029, up from $377.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 52.4x on those 2029 earnings, up from 30.9x today. This future PE is greater than the current PE for the US Aerospace & Defense industry at 36.3x.
• The bullish analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.13%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Defense demand is currently described as very strong, helped by conflicts and depleted missile stockpiles. However, a future slowdown in U.S. and allied defense budgets, or a shift in priorities away from missiles, space vehicles and key programs like PAC 3 or FLRAA, could leave Moog with excess capacity and lower order intake, which would pressure revenue and earnings.
• The company is investing heavily in facilities, automation and a new circuit card assembly line, while also restructuring its global footprint. If demand from commercial aerospace, defense or data center cooling does not match these long-lived investments, fixed costs could rise faster than sales and weigh on operating margins and free cash flow.
• Moog’s exposure to global trade rules and the evolving tariff regime is increasing, with management now expecting 110 basis points of tariff pressure on FY 2026 operating margin. Further tariff changes, broader coverage or limited success of mitigation plans could compress segment margins, especially in Industrial, and reduce earnings and cash generation.
• The balance sheet is more leveraged after issuing US$500 million of 5.5% senior notes and extending debt maturities. If interest rates stay high or rise, or if the business underperforms, higher interest expense and less flexibility for future refinancing or acquisitions could limit growth investments and weigh on net income and free cash flow.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Moog is $520.0, which represents up to two standard deviations above the consensus price target of $446.4. This valuation is based on what can be assumed as the expectations of Moog's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $520.0, and the most bearish reporting a price target of just $405.0.
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be $5.4 billion, earnings will come to $397.4 million, and it would be trading on a PE ratio of 52.4x, assuming you use a discount rate of 8.1%.
• Given the current share price of $367.51, the analyst price target of $520.0 is 29.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.