HEICO Corporation (NYSE: $HEI) is an American aerospace and electronics company founded in 1957 that designs, manufactures, and sells services, and products for the defense, aerospace, electronics, and industrial sectors. Based in Hollywood, FL, its products are used in medical equipment, telecommunication networks, spacecraft, aircraft, and more.
On Tuesday, May 28, 2024, after markets closed, Heico released its Q2 fiscal 2024 results to a positive market reception after reporting double-digit growth in sales and net income.
Heico Reports Stellar Q2 Results
For the second quarter, Heico reported a 39% Y/Y increase in revenue to a record $955.4 million, meeting estimates of $955.38 million. Net income rose 17% Y/Y to a record $123.1 million or an EPS of $0.88, beating EPS estimates of $0.81.
Operating income rose 33% Y/Y to a record $209.2 million in Q2 fiscal 2024 for a consolidated operating margin of 21.9% compared to 22.8% in Q2 fiscal 2023, driven by robust performance of its Electronic Technologies and Flight Support Groups. Heico reported a 35% increase in EBITDA to $252.5 million in the second quarter, compared to $187.2 million in Q2 fiscal 2023.
Segment Performance
Heico’s Flight Support Group, which encompasses its commercial aerospace dealings, has experienced fifteen consecutive quarters of growth in net sales. The segment recorded a 65% Y/Y increase in net sales to $647.2 million, while operating income rose 49% Y/Y to a record $148.9 million for an operating margin of 23%, compared to 25.5% in Q223.
Heico’s Electronic Technologies Group saw a 6% Y/Y increase in revenue to $319.3 million, while operating income rose 11% Y/Y to $75.3 million, for an operating margin of 23.6% compared to 22.5% in Q223.
Balance Sheet
As of the end of Q2 fiscal 2024, Heico had $7.37 billion in total assets, up from $7.2 billion at the end of Q423. Cash flow from operating rose 82% Y/Y to $141.1 million, while the net debt to EBITDA ratio rose to 2.45x compared to 3.04x in Q223.
Commenting on the results, Heico CEO Laurans A. Mendelson stated, “We are very pleased to report strong record quarterly consolidated net sales driven by record quarterly operating results at the Flight Support Group and improved results at the Electronic Technologies Group, as well as strong contributions from our fiscal 2023 acquisitions.”
Heico (HEI) Stock Performance
Following the stellar Q2 fiscal 2024 results, HEI rose 3.07% to $218.55 as of 9:33 AM EDT on Wednesday. HEI stock is up 19.22% since the beginning of 2024 and 33.24% in the past 52 weeks compared to the 26.17% gain of the SPX in the last 52 weeks.
Analysts’ Outlook on HEI
Seven stock analysts are optimistic about Heico’s future prospects, give it an overall strong buy rating. They forecast a wide range for the stock in the next 12 months with a high of $245 and a low of $170. Their average price target of $222.57 is a 4.96% upside based on the most recent closing price.
Should You Invest in Heico in 2024?
With 2024 being an election year, investors may wonder if that should factor into their investment choices. However, based on historical data, the stock market has mostly been bullish during every US presidential election year as voters become energized and engaged on issues regarding the economy.
Another factor to consider is the heightened geopolitical tensions, which have led to a ramp-up in defense-related spending. If you are seeking to gain exposure to the defense industry, Heico is potentially a great choice. It has demonstrated its ability to exceed estimates in revenue and earnings while retaining a strong balance sheet.
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