HEICO (HEI)

Aerospace and defense company HEICO (NSYE:HEI) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 15.7% year on year to $1.15 billion. Its GAAP profit of $1.26 per share was 10.3% above analysts’ consensus estimates.

Company Overview

Founded in 1957, HEICO (NYSE:HEI) manufactures and services aerospace and electronic components for commercial aviation, defense, space, and other industries.

Aerospace companies often possess technical expertise and have made significant capital investments to produce complex products. It is an industry where innovation is important, and lately, emissions and automation are in focus, so companies that boast advances in these areas can take market share. On the other hand, demand for aerospace products can ebb and flow with economic cycles and geopolitical tensions, which can be particularly painful for companies with high fixed costs.

HEICO’s competitors include General Dynamics (NYSE:GD), Raytheon (NYSE:RTX), and TransDigm (NYSE:TDG)

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, HEICO grew its sales at an incredible 17.7% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. HEICO’s annualized revenue growth of 27.4% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, HEICO reported year-on-year revenue growth of 15.7%, and its $1.15 billion of revenue exceeded Wall Street’s estimates by 3%.

Looking ahead, sell-side analysts expect revenue to grow 8.8% over the next 12 months, a deceleration versus the last two years. Still, this projection is above average for the sector and indicates the market sees some success for its newer products and services.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

HEICO has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 21.7%.

Looking at the trend in its profitability, HEICO’s operating margin rose by 1.8 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, HEICO generated an operating margin profit margin of 23.1%, up 1.3 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

HEICO’s EPS grew at a remarkable 13.2% compounded annual growth rate over the last five years. Despite its operating margin improvement during that time, this performance was lower than its 17.7% annualized revenue growth, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.

We can take a deeper look into HEICO’s earnings to better understand the drivers of its performance. A five-year view shows HEICO has diluted its shareholders, growing its share count by 2.7%. This dilution overshadowed its increased operational efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For HEICO, its two-year annual EPS growth of 26.2% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q2, HEICO reported EPS of $1.26, up from $0.97 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects HEICO’s full-year EPS of $4.57 to grow 12.8%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

HEICO has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 17.4% over the last five years.

Taking a step back, we can see that HEICO’s margin dropped by 4.4 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

HEICO’s five-year average ROIC was 12.5%, higher than most industrials businesses. This illustrates its management team’s ability to invest in profitable growth opportunities and generate value for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, HEICO’s ROIC averaged 1.2 percentage point decreases over the last few years. Only time will tell if its new bets can bear fruit and potentially reverse the trend.

HEICO reported $261.9 million of cash and $2.45 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.15 billion of EBITDA over the last 12 months, we view HEICO’s 1.9× net-debt-to-EBITDA ratio as safe. We also see its $69.03 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing HEICO beat analysts’ revenue expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 2.1% to $311.90 immediately following the results.

Updated: December 4, 2025 at 9:12 PM EST

Before investing in or passing on HEICO, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

There are multiple reasons why we think HEICO is an amazing business. First of all, the company’s revenue growth was exceptional over the last five years. And while its cash profitability fell over the last five years, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits. On top of that, HEICO’s impressive operating margins show it has a highly efficient business model.

HEICO’s P/E ratio based on the next 12 months is 59.8x. Expectations are high given its premium multiple, but we’ll happily own HEICO as its fundamentals shine bright. It’s often wise to hold investments like this for at least three to five years, as the power of long-term compounding negates short-term price swings that can accompany high valuations.

Wall Street analysts have a consensus one-year price target of $352.38 on the company (compared to the current share price of $315.48).