Stifel raises HEICO target to $280 on strong earnings By Investing.com

On Tuesday, Stifel Financial (NYSE:) Corp. adjusted its outlook on HEICO Corporation (NYSE:NYSE:), a leading aerospace and electronics company. The firm raised its price target on the stock to $280 from the previous $250, while maintaining a Buy rating. The revision follows HEICO’s latest financial report and subsequent earnings call.

HEICO disclosed its third-quarter earnings yesterday, with a per-share earnings (EPS) of $0.97, surpassing expectations by just over 5%. While the company’s sales aligned with projections, its Electronic Technologies Group (ETG) experienced a slight decline, contrasting with the anticipated 5% growth. Despite this, the Flight Support Group (FSG) exceeded expectations, generating sales of $682 million against the consensus of $664 million, with operating margins in line at 22.5%.

The company’s softer performance in ETG was noticeable, with sales reaching $322 million, which was below the expected $342 million. Additionally, the operating margin for ETG was reported at 23.5%, slightly lower than the forecasted 24.1%. However, HEICO’s free cash flow (FCF) exceeded analyst expectations.

HEICO’s recent acquisition of Capewell’s aerial delivery and descent division is predicted to provide a modest sequential boost as the company progresses through the remainder of the fiscal year 2024. With a strong foundation established, HEICO is anticipated to continue its growth trajectory, particularly within the FSG sector. Analysts suggest that potential tailwinds could reappear in ETG, which has shown softer performance in fiscal year 2024.

In other recent news, HEICO Corporation reported a mixed third fiscal quarter performance for 2024, with earnings exceeding analyst estimates but revenue falling slightly short. The company posted earnings per share of $0.97, surpassing the consensus estimate of $0.92, while revenue of $992.2 million missed analysts’ projections of $996.16 million. Despite this, net income saw a 34% increase to a record $136.6 million, and net sales rose 37% year-over-year to $992.2 million.

The Flight Support Group reported record net sales, surging 68% year-over-year to $681.6 million, attributed to 15% organic growth and recent acquisitions. In contrast, the Electronic Technologies Group’s net sales slightly decreased to $322.1 million. Truist Securities recently raised HEICO’s price target from $248 to $264 based on these developments, maintaining a Buy rating on the stock.

Despite facing challenges in non-aerospace and defense markets, the company’s situation appears to be stabilizing with an uptick in ordering and quoting activities, providing a positive outlook for the fiscal years 2025 and 2026. Truist Securities expects current demand and airline purchasing patterns to persist, potentially allowing HEICO to continue surpassing overall market growth. HEICO’s management has also expressed optimism about achieving net sales growth in both segments for the remainder of fiscal 2024.

InvestingPro Insights

Following Stifel Financial Corp .’s updated outlook on HEICO Corporation, an examination of real-time data and InvestingPro tips can provide additional context for investors. HEICO has demonstrated a robust revenue growth of 41.13% over the last twelve months as of Q2 2024, according to InvestingPro data. This growth is complemented by a substantial gross profit margin of 38.78% and an operating income margin of 20.87%, showcasing the company’s ability to convert sales into profit effectively.

InvestingPro Tips highlight that HEICO is trading at a high earnings multiple, with a P/E ratio of 56.2 and an adjusted P/E ratio for the last twelve months as of Q2 2024 at 66.79. This indicates a premium market valuation, which may be justified by the company’s consistent performance, including its ability to maintain dividend payments for 49 consecutive years and the anticipation of sales growth in the current year. Additionally, the company is noted for its low price volatility, which can be appealing for investors seeking stability.

For investors interested in more detailed analysis and additional tips, there are 15 InvestingPro Tips available for HEICO, including insights into debt levels, profitability, and stock performance over various timeframes. These tips can be found at https://www.investing.com/pro/HEI, offering a comprehensive view of the company’s financial health and market position.

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