It has been about a month since the last earnings report for Heico (HEI - Free Report) . Shares have added about 1.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Heico due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
HEICO Q3 Earnings Surpass Estimates, FY18 View Up
HEICO Corporation reported third-quarter fiscal 2018 earnings of 49 cents per share, which surpassed the Zacks Consensus Estimate of 45 cents by 8.9%. The bottom line also rose 44.1% from the prior-year figure of 34 cents. The year-over-year improvement was driven by higher sales in the reported quarter and increase in operating income.
Quarterly net sales of $465.8 million outpaced the Zacks Consensus Estimate of $441 million by 5.7%. The top line also increased 19% from the year-ago figure of $391.5 million. The upside can be primarily attributed to organic growth that the company witnessed on virtue of increased demand for its defense products as well as continued contributions from well-managed and profitable acquisitions.
HEICO Corp’s total costs and expenses increased 15.5% year over year to $364.4 million in the reported quarter. The uptick was driven by higher cost of sales as well as selling, general and administrative expenses.
Quarterly Segmental Performance
Flight Support Group: Net sales were up 11% year over year to $285.1 million owing to the impact of the company’s fiscal 2017 profitable acquisitions as well as organic growth of 10% within this segment’s product line.
Operating income improved 17% year over year to $54.7 million, courtesy of net sales growth.
Electronic Technologies Group: Net sales surged 35% year over year to $186.4 million, majorly owing to the favorable impact created by the company’s fiscal 2017 and 2018 acquisitions as well as organic growth of 16%.
Operating income increased 45% year over year to $56 million, largely on account of the quarterly net sales growth and an improved gross profit margin as well as a more favorable product mix for certain defense products.
As of Jul 31, 2018, cash and cash equivalents summed $66.9 million compared with $52.1 million as of Oct 31, 2017.
Long-term debt (net of current maturities) totaled $622.9 million as of Jul 31, 2018, up from $673.5 million as of Oct 31, 2017.
As of Jul 31, 2018, cash provided by operating activities was $204.7 million compared with $179.3 million as of Jul 31, 2017.
Fiscal 2018 Guidance
HEICO Corp estimates annual growth in its fiscal 2018 net sales to be in the range of 15-16%, up from the prior estimates in the band of 13-14%.
The company also anticipates its net income growth to be in the range of 35-37% for fiscal 2018, up from 33-35% projected earlier.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, Heico has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Heico has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.