HEICO (NYSE:HEI) Delivers Impressive Q1

Aerospace and defense company HEICO (NSYE:HEI) announced better-than-expected revenue in Q1 CY2025, with sales up 14.9% year on year to $1.10 billion. Its GAAP profit of $1.12 per share was 8.1% above analysts’ consensus estimates.

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Laurans A. Mendelson, HEICO's Executive Chairman, along with Co-Chief Executive Officers Eric A. Mendelson and Victor H. Mendelson, commented on the Company's second quarter results stating, "We are very pleased to report record quarterly operating income and net sales, driven primarily by double-digit consolidated organic net sales growth. This performance mainly reflects strong organic net sales growth across all product lines of the Flight Support Group and double-digit organic net sales growth for the Electronic Technologies Group's space and aerospace products.

Company Overview

Founded in 1957, HEICO (NYSE: HEI) manufactures and services aerospace and electronic components for commercial aviation, defense, space, and other industries.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, HEICO’s 15.1% annualized revenue growth over the last five years was incredible. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. HEICO’s annualized revenue growth of 28.9% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, HEICO reported year-on-year revenue growth of 14.9%, and its $1.10 billion of revenue exceeded Wall Street’s estimates by 3.5%.

Looking ahead, sell-side analysts expect revenue to grow 8.6% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is above average for the sector and indicates the market sees some success for its newer products and services.

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Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

HEICO has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 21.5%.

Analyzing the trend in its profitability, HEICO’s operating margin rose by 2.3 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, HEICO generated an operating profit margin of 22.6%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

HEICO’s EPS grew at a solid 10.1% compounded annual growth rate over the last five years. Despite its operating margin expansion during that time, this performance was lower than its 15.1% annualized revenue growth, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.

Diving into HEICO’s quality of earnings can give us a better understanding of its performance. A five-year view shows HEICO has diluted its shareholders, growing its share count by 2.5%. This dilution overshadowed its increased operating efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For HEICO, its two-year annual EPS growth of 25.2% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q1, HEICO reported EPS at $1.12, up from $0.88 in the same quarter last year. This print beat analysts’ estimates by 8.1%. Over the next 12 months, Wall Street expects HEICO’s full-year EPS of $4.28 to grow 8.4%.

Key Takeaways from HEICO’s Q1 Results

We enjoyed seeing HEICO beat analysts’ revenue expectations. We were also glad its EBITDA outperformed Wall Street’s estimates. Management attributed the strong quarter to "strong organic net sales growth across all product lines of the Flight Support Group and double-digit organic net sales growth for the Electronic Technologies Group's space and aerospace products". The stock remained flat at $277 immediately following the results.

Indeed, HEICO had a rock-solid quarterly earnings result, but is this stock a good investment here? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.