Heico Corporation Supercharges Growth to End 2017

Acquisitions have helped fuel the aerospace supplier's overall growth this year, but the company's organic growth is truly impressive.

Travis Hoium
Travis Hoium
Dec 19, 2017 at 3:53PM

Heico Corporation (NYSE:HEI) continues to be one of the best-performing industrial companies on the market, riding increasing aerospace spending and shrewd acquisitions to record-high revenue. And it doesn't look like the company is going to slow down heading into 2018. 

Fiscal fourth-quarter 2017 results were released after the market closed on Monday and showed incredible growth across the board. Here's a look at the highlights, which didn't have many flaws for investors. 

Tear down of aircraft turbine.

Image source: Getty Images.

Heico Corporation: The raw numbers

Metric Q4 2017 Q4 2016 Year-Over-Year Change
Sales $421.2 million $363.3 million  15.9% 
Net income $53.7 million  $44.3 million  21.3% 
Diluted earnings per share $0.62  $0.52  19.2% 

Data source: Heico Corporation Q4 2017 earnings release.

What happened with Heico Corporation this quarter? 

Acquisitions helped Heico grow in the fiscal fourth quarter, but organic growth is picking up as well. Here are the sector highlights. 

  • The acquisition of AeroAntenna Technology, the company's largest ever, was completed in September 2017 and added to revenue and earnings in the quarter. The company didn't disclose the exact impact, but look for AeroAntenna to continue to grow revenue on a comparable basis through most of 2018. 
  • Flight support sales were up 12% to $256.9 million, about half from organic growth and half from acquisitions. Operating income was up 4% to $46.5 million. In fiscal 2018, management expects revenue growth of 10%. 
  • The electronic technologies group's sales were up 22% to $169.1 million on 14% organic growth from defense, space, and aerospace products. Operating income was up 39% to $51.0 million, an operating margin of 30.2%. 
  • Heico's dividend was increased 9% to $0.0875 per share on a semiannual basis. On a pro forma basis, accounting for the upcoming 5-for-4 stock split, the dividend will be $0.07 per share. 

What management had to say

Heico's great results don't look like they'll be slowing down anytime soon. In the press release, management said this about 2018: 

Based on our current economic visibility, we are estimating 10%-12% growth in full year net sales and in full year net income over fiscal 2017 levels. We anticipate our fiscal year 2018 consolidated operating margin to approximate 20%...

The company didn't include any impact of tax changes in guidance, but that's another tailwind the company will likely have next year. The guidance also doesn't include any impact from acquisitions; management said it would pursue an "aggressive acquisition strategy," so we'll likely see more deals in 2018. 

Looking forward

Not only does Heico have tailwinds from increased demand from the aerospace and defense industries, the company is executing on acquisitions nearly flawlessly. That's a trend that's continued for decades now, and I see no sign of it ending, even if we shouldn't expect near-double-digit organic growth to continue forever.