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Here's Why You Should Add HEICO (HEI) to Your Portfolio Now
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HEICO Corporation’s (HEI - Free Report) disciplined acquisition strategy and solid financial performance has been significant catalysts to its overall growth.
This Zacks Rank #2 (Buy) aerospace and defense is a promising bet at the moment, courtesy of robust merger and acquisition activities as well as strong financial performances.
Growth Projections & Surprise History
The Zacks Consensus Estimate for 2019 earnings is pegged at $2.31 on $2.04 billion revenues. The bottom line indicates a rise 27.6% year over year and the top line reflects growth of 14.97%.
The consensus mark for 2020 earnings is pegged at $2.55 on revenues of $2.22 billion. This calls for 10.1% and 8.4% year-over-year increase in the bottom and the top line, respectively.
Its long-term (three to five years) earnings per share growth rate are projected at 13.95%. HEICO pulled off a positive average earnings surprise of 10.07% in the last four quarters.
Product Innovation
In recent years, the company has been adding new products at a rate of 300-500 Parts Manufacturer Approvals (PMAs) per year. Such product innovations will likely enable the company to expand market share in near future.
Acquisitions Strategy
HEICO's structured acquisition strategy has been driving overall growth. In July 2019, HEICO’s France-based 3D PLUS subsidiary acquired all assets and business of Bretigny-sur-Orge. In June, the company acquired 75% membership interest in Research Electronics International (REI), a designer and manufacturer of technical surveillance countermeasures equipment to detect devices used for espionage as well as information theft.
Considering these acquisitions, the company is expected to expand its product portfolio and customer base, which will likely generate significant cash flow. Notably, the company has no debt maturities until fiscal 2023, which is expected to provide financial flexibility. This will propel the company to pursue high-quality acquisitions and boost growth.
Strong Balance Sheet
The company exited the third quarter of fiscal 2019 with cash and cash equivalents of $59 million. Moreover, cash provided by operating activities was $313.4 million at the end of the quarter compared with $214.8 million as of Jul 31, 2018. A strong balance sheet and cash flow generation capacity provide the company with financial flexibility to increase dividend payouts and undertake earnings-accretive acquisitions.
Debt/Capital & Current Ratio
HEICO is consistently striving to preserve balance-sheet strength. Currently, the company has a current ratio of 2.98 compared with the industry's 2.33 and the Zacks S&P 500 composite’s 1.23.
Its financial strength will enable the company to meet near-term debt obligation. Its long-term debt-to-capital ratio is 33.24%, which is lower than the Zacks S&P 500 composite’s 43.7%.
Price Performance
Shares of HEICO have soared 46.2% in past 12 months compared with the industry’s growth of 15.5% and the Zacks S&P 500 composite’s 3.2%.
Teledyne Technologies’ long-term earnings growth is projected at 7.5%. The Zacks Consensus Estimate for 2019 earnings has moved up 5.38% in the past 90 days to $9.98.
Leidos Holdings’ long-term earnings growth is projected at 7.5%. The Zacks Consensus Estimate for 2019 earnings has moved up 3.04% to $4.74 in the past 90 days.
Lockheed Martin’s long-term earnings growth is projected at 7.1%. The Zacks Consensus Estimate for 2019 earnings has moved up 3.4% in the past 90 days to $21.22.
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Here's Why You Should Add HEICO (HEI) to Your Portfolio Now
HEICO Corporation’s (HEI - Free Report) disciplined acquisition strategy and solid financial performance has been significant catalysts to its overall growth.
This Zacks Rank #2 (Buy) aerospace and defense is a promising bet at the moment, courtesy of robust merger and acquisition activities as well as strong financial performances.
Growth Projections & Surprise History
The Zacks Consensus Estimate for 2019 earnings is pegged at $2.31 on $2.04 billion revenues. The bottom line indicates a rise 27.6% year over year and the top line reflects growth of 14.97%.
The consensus mark for 2020 earnings is pegged at $2.55 on revenues of $2.22 billion. This calls for 10.1% and 8.4% year-over-year increase in the bottom and the top line, respectively.
Its long-term (three to five years) earnings per share growth rate are projected at 13.95%. HEICO pulled off a positive average earnings surprise of 10.07% in the last four quarters.
Product Innovation
In recent years, the company has been adding new products at a rate of 300-500 Parts Manufacturer Approvals (PMAs) per year. Such product innovations will likely enable the company to expand market share in near future.
Acquisitions Strategy
HEICO's structured acquisition strategy has been driving overall growth. In July 2019, HEICO’s France-based 3D PLUS subsidiary acquired all assets and business of Bretigny-sur-Orge. In June, the company acquired 75% membership interest in Research Electronics International (REI), a designer and manufacturer of technical surveillance countermeasures equipment to detect devices used for espionage as well as information theft.
Considering these acquisitions, the company is expected to expand its product portfolio and customer base, which will likely generate significant cash flow. Notably, the company has no debt maturities until fiscal 2023, which is expected to provide financial flexibility. This will propel the company to pursue high-quality acquisitions and boost growth.
Strong Balance Sheet
The company exited the third quarter of fiscal 2019 with cash and cash equivalents of $59 million. Moreover, cash provided by operating activities was $313.4 million at the end of the quarter compared with $214.8 million as of Jul 31, 2018. A strong balance sheet and cash flow generation capacity provide the company with financial flexibility to increase dividend payouts and undertake earnings-accretive acquisitions.
Debt/Capital & Current Ratio
HEICO is consistently striving to preserve balance-sheet strength. Currently, the company has a current ratio of 2.98 compared with the industry's 2.33 and the Zacks S&P 500 composite’s 1.23.
Its financial strength will enable the company to meet near-term debt obligation. Its long-term debt-to-capital ratio is 33.24%, which is lower than the Zacks S&P 500 composite’s 43.7%.
Price Performance
Shares of HEICO have soared 46.2% in past 12 months compared with the industry’s growth of 15.5% and the Zacks S&P 500 composite’s 3.2%.
Price Performance (One Year)
Other Key Picks
Some other top-ranked stocks from the same space are Teledyne Technologies Incorporated (TDY - Free Report) , Leidos Holdings, Inc (LDOS - Free Report) and Lockheed Martin Corporation (LMT - Free Report) . All the three companies hold Zacks Rank #2. You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.
Teledyne Technologies’ long-term earnings growth is projected at 7.5%. The Zacks Consensus Estimate for 2019 earnings has moved up 5.38% in the past 90 days to $9.98.
Leidos Holdings’ long-term earnings growth is projected at 7.5%. The Zacks Consensus Estimate for 2019 earnings has moved up 3.04% to $4.74 in the past 90 days.
Lockheed Martin’s long-term earnings growth is projected at 7.1%. The Zacks Consensus Estimate for 2019 earnings has moved up 3.4% in the past 90 days to $21.22.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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