Given the tight times at the airlines, being an outfit that can provide regulator-approved aircraft replacement parts puts a firm in an admirable position. One of the biggest independent companies in the group is headquartered in Hollywood, Florida.
Heico Corporation (NYSE: HEI) is primarily engaged in the design, manufacture and sale of aerospace and defense products and services. The firm specializes in producing FAA-approved aircraft components, such as combustion chambers and gas-flow transition ducts. It also provides jet engine overhaul and repair services. In addition, the company makes such electronic equipment as power modules and cooling systems. Customers include AMR Corporation (NYSE: AMR), Boeing (NYSE: BA) and UAL Corporation (NASDAQ: UAUA). United Technologies (NYSE: UTX) is a major competitor.
The firm pleased investors last week, when it reported Q2 EPS of $0.35 and revenues of $121.2 million. Analysts had
been looking for $0.34 and $114.5 million. Management also guided FY07 EPS to $1.39-$1.41 ($1.40 consensus) and FY07 revenues to $475-$480 million ($473.32M consensus). HEI shares popped into a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with three "strong buys," two "buys" and one "hold." Analysts expect a 20 percent average annual growth rate through the next five years. The HEI Price to Book ratio (3.24), Sales Growth rate (31.6%), EPS Growth rate (25.00%), Return on Assets (8.76%) and Return on Investment (11.22%) compare favorably with industry, sector and S&P 500 averages.
Institutional investors hold about 27 percent of the outstanding shares. Over the past 52 weeks, the stock has traded between $26.95 and $43.80. A stop-loss of $36.85 looks good here. Note that HEI shares are highly shorted (May short interest = 35% of float).
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.