Warren Buffett's favorite defense stock Heico edged past earnings views for its fiscal fourth quarter late Tuesday but missed on sales. On Wednesday afternoon, Heico stock slid further to test a key technical level.
Buffett-led Berkshire Hathaway opened and grew a position in aircraft parts supplier Heico this year.
The Florida-based company focuses on making niche replacement parts for commercial aircraft. In the defense market, the company produces niche components used in targeting and simulation equipment.
Heico Earnings Surge 34%, Sales Continue To Slow
For the three months ended Oct. 31, Heico delivered EPS of 99 cents on revenue of $1.014 billion. Analysts had expected Heico earnings of 98 cents per share on revenue of $1.031 billion, FactSet shows. Year over year, Heico earnings jumped almost 34% as sales rose 8%.
That marked the company's first billion-dollar sales quarter. Sales growth slowed for the fourth consecutive quarter, down sharply from 37% the prior quarter and missing views for a 10% increase.
For fiscal 2025, Heico guided net sales growth across its Flight Support Group and Electronic Technologies Group, "supported by strong demand for the majority of our products." Analysts project sales growth of 9.5% for the full year vs. 30% in fiscal 2024, FactSet shows. They forecast Heico earnings of $4.28 a share, an almost 17% increase from 2024.
Investors will listen for progress on the aircraft components maker's recent acquisitions, including a specialty components maker and, separately, U.S. producers of jet cabin components and power distribution systems. They will also be tuned to any news suggesting that Heico is benefiting from Boeing's ongoing struggles, including its recent strike.
Heico Stock Gaps Down On Mixed Earnings
Shares of Heico tumbled nearly 9% in big volume on Wednesday. Heico stock slid further below the 50-day moving average in afternoon stock market action to test the 200-day line for the first time since January.
A November breakout from a seven-week flat base has fizzled. The relative strength line has begun to trend lower after a sharp rally in the second and third quarters of this year. A rising RS line, the blue line in the chart shown, means that a stock is outperforming the S&P 500 index.
Howmet Aerospace, on the IBD 50 list of top growth stocks, shed 0.3% in Wednesday's session. Howmet stock neared a test of the 50-day line.
Trade And Regulatory Impacts Under Trump
Morningstar analyst Nicolas Owens said on Nov. 11 that he is watching trade and regulatory impacts on the aerospace sector under incoming President Donald Trump. "We don't think (challenging) trade conditions between the European Union and the U.S., or accusations of government subsidy between Boeing and Airbus are likely to reemerge in a second Trump administration," he added.
Heico runs two business segments: Flight Support Group and Electronic Technologies Group.
It touts 13 straight quarters of growth in the larger Flight Support unit. It ties that to an improving commercial aviation market after the coronavirus pandemic. The company also says it has benefited from acquisitions over the past three years.
Warren Buffett Defense Play
In Q2, Warren Buffett led Berkshire picked up 1.04 million shares of Heico at around 165 per share, with a market value of over $185.37 million, WhaleWisdom data shows. Berkshire added more than 5,000 Heico shares in Q3 while slashing top holding Apple by 25%, or 100 million shares.
Heico makes up less than 0.1% of Berkshire's total stock investment portfolio. Apple stock still accounts for 26% of the portfolio, despite cuts to that top portfolio holding every quarter this year.
Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.
