Heico Upbeat On Brisk Commercial Aero Sales, Bizjet Potential

Heico’s sales and profit rose by double digits in its fiscal 2025 first quarter (Q1) due to strong demand for its commercial aerospace products, particularly in the aftermarket segment.

Heico’s fiscal Q1 revenue rose 14.9% on an annual basis to $1.03 billion while earnings per share reached $1.20. Both figures were well ahead of Wall Street’s expectations.

Investors cheered the better-than-expected performance and Heico’s share price had risen about 12% in trading as of midday on Feb. 27.

“What a difference a quarter makes,” Melius Research VP Scott Mikus said in a Feb. 27 note to clients. Noting that investors reacted negatively after Heico missed consensus estimates on sales and sales margins in its fiscal 2024 fourth quarter, Mikus said at the time “the concern was that the Flight Support Group’s (FSG) core growth would continue to slow due to tougher [comparisons] now that global air traffic has fully recovered.”

However, Heico’s fiscal Q1 results “should quell investor concerns,” he said. “While not a perfect apples-to-apples comp due to Heico’s January quarter-end,” the company’s 12% core sales growth ranks as the fourth highest in Melius’s coverage this quarter and beat a consensus estimate by 5%.

In an earnings call, Heico’s management highlighted FSG’s performance, whose fiscal Q1 net sales increased 15% to a record $713.2 million. The organic net sales growth mainly reflects increased demand for Heico’s aftermarket replacement parts and repair and overhaul parts and services, Co-President Eric Mendelson said.

“I think most of the growth is coming from expansion with existing customers,” he said. “We pretty much sell to everybody in the industry.”  

Heico does not foresee any slowdown in sales due to the recent delivery travails of Boeing and Airbus. Though “Boeing in particular has had more challenges ... Airbus has been delivering a lot of new aircraft,” Mendelson said.

MRO providers have been among the top beneficiaries of Airbus and Boeing’s production woes, as fewer new planes have resulted in the increased flying of older jets that require more shop visits.

“I’m really just not worried about it,” he added.

Mendelson expressed optimism about Heico’s potential in the business aviation segment. He cited the company’s recent acquisition by its FSG of 90% of the stock of business jet MRO provider Millennium International. Millennium specializes in the repair and support of both next-generation and legacy business jet avionics systems and components. Its customers include aircraft OEMs, fleet operators, repair businesses, and avionics brokers. The company has a wide range of capabilities that span avionics displays, navigation and radio equipment, weather radars and collision avoidance systems.

“I’m very excited about the Millennium International acquisition,” he said.

With the acquisition of Millennium, Heico will be able to offer business aviation customers a wide variety of parts whether those produced by original equipment manufacturers (OEMs), or others like PMA and DER parts, Mendelson said. A PMA designation from the FAA demonstrates that a company is authorized to manufacture aircraft components that meet industry standards. Compared to OEM components, PMA parts are usually 20% to 80% cheaper. DER repairs restore a broken component back to the initial design requirement. A DER repair part is exclusive to its approval holder and cannot be individually resold in the aftermarket like a PMA part.

“I think there’s going to be a lot more potential for us in the bizjet space,” Mendelson said, adding that Heico is “very much focused there.”

Analysts expect Heico’s sales to continue growing in the coming months. In a Feb. 27 client note, Robert Stallard of Vertical Research Partners said that recently completed deals should provide Heico with momentum, adding that the company remains on the lookout for promising acquisition targets.