Despite exceeding expectations in its fiscal third-quarter performance, aerospace aftermarket parts leader HEICO (HEI) witnessed a decline in stock prices as investors sought even higher returns.
With sales reaching approximately $723 million, a notable increase of 27% compared to the previous year, HEICO outperformed Wall Street estimates of around $702 million. Similarly, earnings per share stood at 74 cents, reflecting a growth rate of 23% compared to the same period last year, surpassing analysts’ predicted value of 73 cents.
Despite these impressive figures, HEICO’s stock is currently experiencing a premarket decline of 5.3%, trading at $159. In contrast, both S&P 500 and Dow Jones Industrial Average futures show a minor increase of 0.1%.
According to Vertical Research Partners analyst Rob Stallard, investors were expecting higher results from HEICO this quarter, influenced by the success demonstrated by other companies in the aero aftermarket sector. Stallard notes that even when companies exceeded second-quarter forecasts, their stock prices still faced downward pressure.
Stallard maintains a Buy rating on HEICO shares and has set a price target of $200 for the stock.
TransDigm and HEICO: Strong Performers in Commercial Aerospace Supplier Industry
TransDigm (TDG) recently surpassed both sales and earnings estimates for the quarter in early August. Despite this positive news, the company witnessed a slight decline of approximately 3% in its share value. The reason for this dip is not an underlying weakness in the company’s performance but rather an increased investor expectation due to the rising number of people traveling by air post-Covid-19 pandemic. This trend is particularly advantageous for commercial aerospace suppliers like TransDigm.
Another notable player in the commercial aerospace supplier industry is HEICO. The company has effectively positioned itself as a growth stock with high expectations. Currently, its shares are trading at a multiple of around 46 times the estimated earnings for 2024. Additionally, HEICO has outperformed Wall Street’s earnings forecast in eight of the last ten quarters. However, it is important to note that the company experienced a temporary drop in share prices following three of these quarterly achievements.
Positive Financial Outlook
HEICO’s management team expressed their contentment with the current quarter’s performance. According to CEO Laurans Mendelson, the company achieved record consolidated net sales for the quarter. This growth can be attributed to a robust demand for commercial aerospace products and services, as well as the contributions from acquisitions made in fiscal years 2022 and 2023. Such achievements have resulted in a substantial organic growth rate of 12% in net sales.
Earnings Conference Call
To further discuss the fiscal third-quarter results, management will be hosting an earnings conference call on Tuesday morning at 9 a.m. Eastern time. This provides an opportunity for shareholders and stakeholders to gain more insights regarding HEICO’s performance and future prospects.
In terms of market performance, HEICO’s shares have demonstrated consistent growth over the past year. As of Tuesday, the company’s shares have increased by approximately 9% year-to-date and around 8% over the past 12 months.