- 36-Year Share Price Growth HEICO achieved a 23% compound annual growth rate in share price over 36 years.
- Record Q1 Net Income Consolidated net income rose 13% to $190.2 million ($1.35 per diluted share), with operating income up 15% and net sales up 14%.
- Flight Support Group Strength Delivered 21% operating income growth and 15% net sales increase, driven by operational excellence and strong aftermarket demand.
- Electronic Technologies Margin Pressure Operating margin dipped due to defense product mix and lower space sales, but pre-amortization margin held at ~24%, with sales up 12%.
- Acquisition Pipeline & Organic Growth Organic growth hit 12% despite difficult comparisons, while acquisition activity (e.g., Rockmart Fuel) targets 1st-year earnings accretion and strategic expansion.
Segment Performance
The Flight Support Group's strong performance was driven by a 21% increase in operating income and a 15% increase in net sales. The Electronic Technologies Group's operating margin decreased primarily due to a less favorable product mix of defense products and a decrease in net sales of space products. However, before acquisition-related intangibles amortization expense, the group's operating margin was approximately 24%. Eric Mendelson noted that the recent sequential drop in ETG sales is temporary and expected to bounce back to the low to mid-20s range for the year.
Valuation and Growth Prospects
HEICO's current valuation metrics indicate a premium, with a P/E Ratio of 61.21 and an EV/EBITDA of 35.89. The company's ROE stands at 16.33%, and ROIC at 10.0%. Analysts estimate next year's revenue growth at 7.9%. The company's strong track record of growth, with a 36-year 23% compound annual growth rate in share price, justifies some premium. HEICO's disciplined focus on financial management emphasizes long-term shareholder value through a combination of strategic acquisitions and organic growth while preserving financial strength and flexibility.
Acquisition Activity and Outlook
HEICO continues to pursue selective acquisition opportunities that align with its growth strategy. The company is optimistic about its ability to win new opportunities in fiscal '26 and continue its growth, profitability, and strong cash generation legacy. The acquisition of Rockmart Fuel is expected to be accretive to earnings in the first year, and the company is excited about the Ethos acquisition, which provides access to a growing market in power generation.
Industry Trends and Competitive Advantage
HEICO's PMA business has been a significant contributor to its growth, with a strong presence in the market. The company has a catalog of 20,000 parts, which is a competitive advantage, and is focusing on developing new parts and expanding its offerings. The industry is facing service challenges, and HEICO's availability and quality are key differentiators. Eric Mendelson believes that the industry is recognizing the value of PMA, and HEICO's customer relationships are unmatched.