On Dec 14, Zacks Investment Research upgraded HEICO Corporation (HEI - Snapshot Report) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
HEICO Corporation has been witnessing rising earnings estimates on the back of strong fiscal third-quarter 2013 results, strategic acquisitions and stock splits by the company. Moreover, this well-known aerospace and defense equipment maker delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 4.0%. The long-term expected earnings growth rate for this stock is 13.5%
HEICO Corporation reported fiscal third-quarter (ended July 31) results on Aug 27. Non-GAAP earnings per share came in at 48 cents, surpassing the Zacks Consensus Estimate and year-ago earnings of 43 cents by 11.6%. Earnings were primarily aided by solid top-line growth of 18.0%, driven by growth across its segments.
This apart, the company also completed the strategic acquisition of Lucix Corporation for an undisclosed sum. This acquisition not only expands HEICO’s satellite and space component operations, but it will also be accretive to first quarter 2014 earnings.
Just a month after reporting third quarter results, HEICO’s board of directors approved a 5 for 4 stock splits on both its Class A Common Stock payable in shares of its Class A Common Stock and on its Common Stock payable in shares of its Common Stock. The stock splits will be effective in the form of 25% stock dividends on each of the classes of common stock, payable to shareholders of record as of Oct 11, 2013. However, the additional shares will be distributed to shareholders on or about Oct 22, 2013. This stock split primarily reflects the company’s confidence in its long-term growth and financial outlook. Since the past 13 years, HEICO has consistently delivered strong returns and value to its shareholders. Due to the impact of prior increases in cash dividends, prior stock splits and stock dividends, one share of HEICO worth $8.38 in 1990 is valued at on a at approximately $900 today, reflecting an increase of 107 times the 1990 value with a compound annual growth rate of 23%.
Further, driven by management’s confidence in the company’s business, the board intends to increase the company's regular semi-annual cash dividend to 6 cents per share, representing a 7% increase over the prior semi-annual per share amount of 60 cents, as adjusted for the 5 for 4 stock splits. In Jun 2013, the cash dividend was increased by 17%.
Although the Zacks Consensus Estimate for fiscal 2013 remained stagnant at $1.49 per share over the last 90 days, the Zacks Consensus Estimate increased by 1.2% to $1.69 per share for fiscal 2014.
Other companies in the aerospace and defense sector worth considering at the moment include Alliant Techsystems Inc. (ATK - Analyst Report), Hexcel Corp. (HXL - Snapshot Report) and Teledyne Technologies Inc. (TDY - Snapshot Report). While Alliant Technologies has a Zacks Rank #1 (Strong Buy), Hexcel and Teledyne carry a Zacks Rank #2 (Buy).