From providing parts for airline jets and warplanes to industrial turbines and missiles, Heico is a key supplier to the aerospace and defense industry. And the stellar year-to-date performance of Heico stock has earned it a spot on the IBD Leaderboard watchlist.
Plus, as is the case with tech giants Apple and Amazon.com, Warren Buffett's Berkshire Hathaway has a stake in Heico.
Heico Stock Tests Buy Zone
Since resetting its base count in June of last year and weathering some turbulence that summer, Heico has made an impressive climb. In fact, Heico stock is up 51% for the year. That actually tops the performance of fellow Buffett stocks Amazon (33%) and Apple (18%).
While Heico did not join industry peers Curtis-Wright and OSI Systems on this month's list of new buys by the best mutual funds, it has shown solid signs of institutional demand. Heico sports a B Accumulation/Distribution Rating and a 1.4 up/down volume ratio. Plus, 28 funds with an A+ rating from IBD own shares of Heico.
Last Wednesday, the defense contractor cleared a 269.38 buy point in a second-stage flat base. But after rising again the next day, it began to sputter, slipping below that entry. So far, there's no sell signal and the stock flashed signs of resilience on Monday. Heico stock fell fractionally but came off the day's lows to close near the top of its buy range at 269.76, sneaking back into buy range.
Heico remains solidly above its 50-day moving average. Its 21-day exponential moving average is poised to retake the longer-term 50-day benchmark, which would show rising technical strength.
After spiking as Heico broke out, the relative strength line has dipped slightly. Look for the RS line to climb back to a 52-week high to show rebounding market leadership.
Meanwhile, Apple after pulling back from its October breakout, Apple showed resilience Monday by retaking its 50-day line. The iPhone maker also managed to close the session right at its 21-day line. Amazon has also pulled back from a recent breakout but remains within buy range.
Analysts See Continued Growth For Heico
Headquartered in Hollywood, Fla., Heico operates in two segments: the Flight Support Group and the Electronic Technologies Group. Given that business focus, the company has a big stake in commercial plane orders and defense spending.
Heico has posted three straight quarters of accelerating earnings growth, including a 31% spike to 97 cents a share in its latest report on Aug. 26. Sales growth rose 37% to $992 million.
For its upcoming quarterly report on Dec. 16, analysts forecast 33% earnings growth to 98 cents per share. Revenue is expected to slightly eclipse the $1 billion mark.
For the full fiscal year, Wall Street sees 28% earnings growth to $3.65 per share.
With its combination of strong fundamental and technical performance, Heico commands a 98 Composite Rating.
Two New Acquisitions
On Nov. 4, Heico announced that its Paris, France-based subsidiary Exxelia has acquired 70% of SVM Private Limited. Based in India, SVM makes high-performance electronic passive components and subsystems serving the health care and industrial markets.
In October, Heico acquired roughly 88% of Mid Continent Controls, or MC2. Based in Kansas, MC2 is a niche designer and manufacturer of proprietary in-cabin power and entertainment components and subsystems for business jets. Heico expects the acquisition to be accretive to its earnings within the year following the acquisition.
Follow Matthew Galgani on X (formerly Twitter) at @IBD_MGalgani.
