It has been about a month since the last earnings report for Heico (HEI). Shares have added about 0.1% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.
HEICO Corp. Q1 Earnings Top Estimates, Revenues Up Y/Y
HEICO Corporation reported first-quarter fiscal 2019 earnings of 58 cents per share, surpassing the Zacks Consensus Estimate of 46 cents. The bottom line rose 20.8% from the prior-year figure of 48 cents. The year-over-year improvement was driven by higher sales in the reported quarter and increase in operating income.
Total Sales
Quarterly net sales of $466.1 million outpaced the Zacks Consensus Estimate of $454 million by 2.67%. The top line also increased 15.3% from
the year-ago quarter’s $404.4 million. The upside can be primarily attributed to the company’s organic growth.
Operational Update
HEICO Corp’s total costs and expenses increased 13.3% year over year to $368.2 million in the reported quarter. The uptick was driven by higher cost of sales, and increased selling, general and administrative expenses.
Segmental Performance
Flight Support Group: Net sales were up 13% year over year to $287.2 million, owing to increased demand and new product offerings within the company’s aftermarket replacement parts and specialty products categories.
Operating income improved 15% year over year to $52.9 million, courtesy of net sales growth and improved gross profit margin, mainly reflecting a more favorable product mix within the specialty products category.
Its operating margin increased to 18.4% in the first quarter of fiscal 2019, up from 18.0% in the first quarter of fiscal 2018.
Electronic Technologies Group: Net sales rose 18% year over year to $184.4 million, majorly owing to increased demand for certain defense, aerospace and space products.
The company’s operating margin improved to 28.0% in the first quarter of fiscal 2019, up from 27.8% in the first quarter of fiscal 2018.
Operating income increased 19% year over year to $51.6 million, largely on account of the quarterly net sales growth and improved gross profit margin.
Financial Details
As of Jan 31, 2019, cash and cash equivalents summed $57.9 million compared with $59.6 million as of Jan 31, 2018.
Long-term debt (net of current maturities) totaled $607.6 million as of Jan 31, 2019, up from $531.6 million as of Jan 31, 2018.
As of Jan 31, 2019, cash provided by operating activities was $49.6 million compared with $51.9 million as of Jan 31, 2018.
Fiscal 2019 Guidance
HEICO Corp estimates fiscal 2019 net sales to grow 9-11%, up from its prior growth estimates of 8-10%.
The company also anticipates net income growth of 11-13% for the fiscal, up from the prior growth estimates of approximately 10%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Heico has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Heico has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Heico Corporation (HEI): Free Stock Analysis Report
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