Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Shares of Heico Soared on Wednesday

By Lou Whiteman - May 29, 2019 at 3:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The quarterly winning streak for the aerospace component manufacturer continues.

What happened

Shares of Heico ( HEI 2.45% ) had climbed more than 11% as of 2:43 p.m. EDT on Wednesday, after the aerospace component manufacturer reported quarterly results that were better than expected and raised guidance for the full year.

So what

After markets closed Tuesday, Heico reported fiscal second-quarter earnings of $0.60 per share on revenue of $515.6 million, easily surpassing consensus estimates for $0.49 per share in earnings on revenue of $480 million. The company generated double-digit organic growth in both its flight support and electronics segments, on top of the benefit from several bolt-on acquisitions.

Two jets leaving contrails against a blue sky

Image source: Getty Images.

The company's consolidated operating margin for the quarter was 23.1%, up from 21.3% a year ago. EBITDA (earnings before interest, taxes, depreciation, and amortization) grew by 29% to $142.2 million.

Heico CEO Laurans Mendelson said in a statement that based on the results for the first half of the fiscal year, the company is upping its full-year guidance for net revenue growth to between 12% and 13%, from 9% to 11% previously; guidance for full-year net income growth is up to between 17% and 18%, up from 11% to 13% previously.

Now what

Heico is a long-term outperformer, but investors pay a rich premium for those results. The company trades at a multiple of 53 times trailing earnings, substantially ahead of TransDigm Group's multiple of 30.

To justify its sky-high valuation, Heico will have to continue to be an active acquirer, on top of its projections for organic growth.

Mendelson said in his statement that "we plan to continue our commitments to developing new products and services, further market penetration, and an aggressive acquisition strategy while maintaining our financial strength and flexibility."

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

HEICO Corporation Stock Quote
HEICO Corporation
$142.89 (2.45%) $3.42

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/06/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.