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Heico (HEI) Gains From Acquisition Efforts, Import Tariff a Woe
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Heico Corporation’s (HEI - Free Report) strong acquisition strategy is boosting its customer base. Yet, higher import tariff on steel and aluminum import pose threat to this stock’s prospects.
This Zacks Rank #3 (Hold) stock delivered an earnings surprise of 13.23%, on average, in the last four quarters. The Zacks Consensus Estimate for fiscal 2021 earnings per share has moved 1.4% upward to $2.19 in the past 60 days.
Tailwinds
The company is expanding its customer base through acquisitions that are driving its performance and supplementing organic growth. In March 2021, Heico completed the acquisition of Pyramid Semiconductor, which is expected to expand its product portfolio and customer base, thereby generating a strong cash flow.
The company maintains a strong solvency position, at least for the near term. Notably, its current debt was $1 million as of Apr 30, 2021, while its cash and cash equivalents came in at $385 million. Further, its debt-to-capital ratio of 0.21 declined sequentially from 0.24, which make us optimistic about the company’s ability to meet debt obligations in the near future.
Headwinds
In January 2020, the Trump administration decided to raise tariffs on import of steel and aluminum derivatives, which increased cost and disrupted the supply chain. This, in turn, hurt the prospects of defense equipment stocks like Heico.
The ongoing government-induced travel restrictions worldwide, following the spread of the COVID-19 have affected commercial aerospace business. Consequently, the demand for the company's commercial aerospace products and services was negatively impacted. Notably, in the second quarter of fiscal 2021, Heico’s net sales suffered a decline of 0.4% year over year.
Price Performance
Heico’s shares have returned 50.6% in the past 12 months, outperforming the industry’s 45.6% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the same industry are Teledyne Technologies (TDY - Free Report) , Kaman Corporation and Rada Electronics Industries Limited . While Teledyne sports a Zacks Rank #1 (Strong Buy), Kaman Corporation and Rada Electronics hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for 2021 earnings per share for Teledyne Technologies, Kaman Corporation and Rada Electronics has moved up 11.1%, 3.9% and 22.9%, respectively, in the past 60 days.
The return on equity of Teledyne Technologies, Kaman Corporation and Rada Electronics is 13.5%, 6.3% and 10.8% respectively.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Image: Bigstock
Heico (HEI) Gains From Acquisition Efforts, Import Tariff a Woe
Heico Corporation’s (HEI - Free Report) strong acquisition strategy is boosting its customer base. Yet, higher import tariff on steel and aluminum import pose threat to this stock’s prospects.
This Zacks Rank #3 (Hold) stock delivered an earnings surprise of 13.23%, on average, in the last four quarters. The Zacks Consensus Estimate for fiscal 2021 earnings per share has moved 1.4% upward to $2.19 in the past 60 days.
Tailwinds
The company is expanding its customer base through acquisitions that are driving its performance and supplementing organic growth. In March 2021, Heico completed the acquisition of Pyramid Semiconductor, which is expected to expand its product portfolio and customer base, thereby generating a strong cash flow.
The company maintains a strong solvency position, at least for the near term. Notably, its current debt was $1 million as of Apr 30, 2021, while its cash and cash equivalents came in at $385 million. Further, its debt-to-capital ratio of 0.21 declined sequentially from 0.24, which make us optimistic about the company’s ability to meet debt obligations in the near future.
Headwinds
In January 2020, the Trump administration decided to raise tariffs on import of steel and aluminum derivatives, which increased cost and disrupted the supply chain. This, in turn, hurt the prospects of defense equipment stocks like Heico.
The ongoing government-induced travel restrictions worldwide, following the spread of the COVID-19 have affected commercial aerospace business. Consequently, the demand for the company's commercial aerospace products and services was negatively impacted. Notably, in the second quarter of fiscal 2021, Heico’s net sales suffered a decline of 0.4% year over year.
Price Performance
Heico’s shares have returned 50.6% in the past 12 months, outperforming the industry’s 45.6% growth.
Stocks to Consider
Some better-ranked stocks in the same industry are Teledyne Technologies (TDY - Free Report) , Kaman Corporation and Rada Electronics Industries Limited . While Teledyne sports a Zacks Rank #1 (Strong Buy), Kaman Corporation and Rada Electronics hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for 2021 earnings per share for Teledyne Technologies, Kaman Corporation and Rada Electronics has moved up 11.1%, 3.9% and 22.9%, respectively, in the past 60 days.
The return on equity of Teledyne Technologies, Kaman Corporation and Rada Electronics is 13.5%, 6.3% and 10.8% respectively.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How to Profit from Trillions on Spending for Infrastructure >>