Heico Corp (NYSE:HEI) has been around since 1957. And since that time it has grown its business into a global provider of parts and equipment for aircraft, defense and industrial companies.
Given all the talk generated in recent days by the merger between United Technologies (NYSE:UTX) and Raytheon (NYSE:RTN), it seemed timely to discuss other specialized and successful companies in the sector that don’t get many headlines on a regular basis.
The Landscape for HEI Stock
Of course, there’s also the issue with Boeing (NYSE:BA) and its 737 Max8 grounding, which continues. Initially the airlines that owned the planes thought this was going to be a brief suspension of service but it continues to drag on as BA has released a greater number of protocol issues in drips and drabs, rather than coming clean at the outset of the investigation.
At this point, there are other models that are now getting a good look after some concerns in production have been unearthed in the Max investigation.
Add to that the delays that are happening with General Electric’s (NYSE:GE) GE9x new engines for BA’s massive 777X.
What all this means for Heico is extra business. You see, modern aircraft are precision machines, and that means they perform at optimal levels, and that means parts wear out quickly.
With fewer new planes deployed in airlines’ fleets, the demand for parts increases. And that’s very good news for HEI stock. In the past year, Heico is up 72% and it’s up 66% year to date. Yet, it’s only trading at a 58x trailing price-to-earnings ratio. Granted that’s not a bargain, but it’s below its growth rate.
HEI reported fiscal Q2 numbers in late May, and they easily beat analysts’ estimates as a whole. Each division also performed well.
Another strength for Heico is that it works on both the defense and aerospace side of things as well as commercial aircraft. This means it’s not beholden to growing defense budgets or winning those long-term contracts.
Its global presence also allows it diversification into the powerful growth happening in commercial travel and logistics in Asia, particularly China. Its long history in the business demonstrates its ability to compete in this dynamic and expanding market.
And with just a $15 billion market cap, this could very well be a takeover target for an airplane maker or an industrial conglomerate looking to get a foothold in the sector.
Certainly the U.S. defense sector has been the center of attention recently with the UTX-RTN merger, but it’s the commercial side that holds the greatest long-term potential.
And with private companies moving into the space race, this is another big opportunity for Heico to grow its business. All this is why my Portfolio Grader gives HEI stock a strong A rating.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.