We recently issued an updated research report on HEICO Corporation (HEI - Free Report) . The company’s adjusted earnings in fourth-quarter fiscal 2018 came in at 49 cents per share, which stood in line with the Zacks Consensus Estimate.
HEICO Corp. currently holds only 2% of the market for jet engine and aircraft component replacement parts. Therefore, the company is left with immense scope for expansion in this space.
What’s Driving the Stock?
HEICO Corp.’s disciplined acquisition strategy has been an important element for the company's overall growth, further supplementing its organic growth. In August 2018, HEICO Corp. completed the acquisition of Optical Display Engineering that specializes in aftermarket avionics display. With this deal, HEICO Corp. completed four acquisitions during fiscal 2018. We expect such acquisitions to expand the company’s product portfolio and customer base, which, in turn, should keep its cash flow in a good shape.
HEICO Corp. continues to exhibit solid financial performance. Cash provided by operating activities rose 13.9% to $328.5 million at the end of the fiscal fourth quarter from the prior-year quarter. Such a strong balance sheet and cash flow generation capacity provide the company with financial flexibility in matters of incremental dividend and earnings accretive acquisitions.
Estimates for HEICO Corp. have been revised upward over the past 30 days. Notably, the company’s bottom line exceeded the consensus mark in two of the trailing three quarters.
However, the company is subject to interest rate risk related to the issuance of debt. Notably, material rise in long-term interest rates is a major risk for capital intensive stocks like HEICO Corp. With the current U.S. economy being in favor of the expanding interest rate, the credit market may not turn out to be much favorable for HEICO Corp.
Heico Corporation Price and Consensus