Opinions
David Driscoll
HEICO CORP
HEI-N
BUY
Mar 25, 2025
Stock price when the opinion was issued
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Apart from the most recent earnings, the street loves this name. Selling plane parts, it benefits from the shortage of new plays and increased plane repairs. They have mini-monopolies on these parts and is pushing prices aggressively, a good business model. The valuation has run up, though. He isn't looking at this now. Prefers Raytheon for its performance. You're fine to keep holding it though.
HEI is a high-quality name in the aerospace industry; the company possesses a track record of compounding EPS by double-digits through acquisitions lasting for decades. In Q3-2024, HEI reported revenue growth of 37% to $992M, slightly below the expectation of $994M, and EBITDA also grew 40% to $2.84B. HEI also reported EPS of $0.97, beating the estimate of $0.92. HEI’s Flight Support segment experienced very strong demand with around 15% organic growth. HEI also runs a moderately leveraged balance sheet with net debt/EBITDA of 2.11x. Overall the result looks okay, in line with expectations, but its valuation is still not cheap enough to add at the current levels. Still, we would be comfortable holding HEI here for the long term.
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HEI has seen a bit of a pullback recently but is still up 32% over the last year. Growth seemed to slow a bit in the last quarter and trading at 55X earnings doesn't leave a whole lot of room for error. Regardless, we don't think a whole lot has changed with a single earnings report here and we don't think a thesis needs to change at this stage. We would be comfortable as a HOLD and would be more of a BUY if it approached $220.
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They benefit from peer Boeing whose accident rate continues to rise. They make OEM parts for commercial planes, and their electronics division has contracts with US Defence.