Heico shares surged 14% after strong earnings report crushing Wall Street expectations on defense segment📈

Shares of Heico Corp., (HEI.US), aerospace & defense company increased yesterday by almost 14% despite a broader market sell-off, as the company reported higher than expected earnings with impressive rise of its core business in both defense and commercial aerospace industries. Ahead of the report, Wall Street expected that the company defense sector will slow down, after weaker results during the previous quarter. Heico quarterly report proved that analysts' expectations were wrong.

Heico fiscal Q1 2025 earnings (calendar Q4 2024)

• Revenue up 15% YoY to a record $713.2 million; up from $618.7 a year ago

• Net income up 46% YoY to a record $168 million or $1.20 per diluted share; up from $114.7 million and $0.82 a year ago

• Operating income up 26% YoY with cash flow up 82% YoY to $203 million vs $111.7 million a year ago

• EBITDA up 22% YoY to $273.9 million vs $224 million a year ago

Earnings by business segment

Flight Support Group sales increased 15% YoY; 13% organic growth.

• Operating income up 22% YoY to $166.1 million, up from $136.1 million a year ago

• Operating margin up 23.3% from 22% a year ago

Electronic Technologies Group sales up 16% YoY to $330.3 million; 11% organic growth.

• Operating up 38% YoY to $76.5 million, up from $55.3 million a year ago

• Operating margin up to 23.1% vs 19.3% a year ago

Heico business strength

The company deployed approximately $255 million in acquisitions during the fiscal Q1 2025, maintaining stable leverage ratios, with net debt to EBITDA rising slightly from 2.04x to 2.08x. HEICO’s Flight Support division has maintained an impressive streak of growth over several years, benefiting from a confluence of industry dynamics.

• Airlines are grappling with record-high aircraft usage, persistent delays in aircraft production—particularly at Boeing—and an aging global fleet requiring more frequent maintenance. As a result, many carriers are increasingly opting for HEICO’s FAA-approved replacement parts over more expensive OEM alternatives to manage rising maintenance costs amid broader inflationary challenges. 
• The company’s 15% organic growth in aftermarket replacement components highlights its ability to capture market share from OEMs.  Also, Heico informed that it has signed an exclusive business contract with US industrial giant, Honeywell, related to Boeing (BA.US) parts services and exploitation.

On the defense and space side, HEICO’s Electronic Technologies division reported a 38% increase in operating income on the back of 16% sales growth. With the U.S. defense budget reaching $886 billion for FY2024 and NATO countries ramping up their military spending, demand for high-tech components remains robust.

• Unlike commercial aviation, defense contracts typically provide stable, long-term revenue with attractive margins, positioning HEICO well for sustained growth. Also, HEICO invested $255 million this quarter in niche companies with proprietary technologies, further enhancing its product portfolio. 
• Despite ongoing supply chain disruptions affecting the aerospace sector, HEICO’s ability to expand margins in both business segments reflects strong operational execution. Wall Street welcomed the earnings report with euphoria.

Heico (D1 interval)

The company shares surged above EMA200 after the biggest sell-off since 2022 bear market.

Source: xStation5