Heico saw brisk sales growth in the second quarter of fiscal 2025, benefiting from strong aftermarket and defense demand in both the U.S. and Europe.
Heico posted double-digit sales growth in the second quarter of fiscal 2025, benefiting from strong aftermarket and defense demand in both the U.S. and Europe.
Including acquisitions, the non-OEM component supplier and MRO provider’s sales rose 15% to $1.1 billion, beating a consensus estimate by 4%.
Heico’s earnings per share rose 27% to $1.12 compared to the 13% average earnings per share growth reported by Melius Research’s coverage list in the first quarter of the calendar year.
The top growth driver was the company’s Flight Support Group (FSG), which is heavily tied to the commercial aerospace aftermarket.
Heico posted defense sales growth in both in the FSG and its Electronic Technologies Group (ETG), which focuses mainly on defense electronics.
The company’s first earnings call since Eric and Victor Mendelson were appointed co-CEOs on May 1, succeeding their father Larry Mendelson—who now serves as executive chairman—was noticeably upbeat given the challenging macroeconomic environment.
Missile defense manufacturing sales were strong for Heico during the quarter, driven by increasing demand from the U.S. and its allies. “With the substantial backlog of defense missile orders and ongoing shortages, we anticipate meaningful expansion from this firm pipeline,” Eric Mendelson said in the earnings call.
He added that Heico is “very optimistic in both the U.S. as well as the international markets.”
He cited Blue Aerospace, a military aftermarket provider that Heico bought in 2011 which operates in more than 30 countries. With NATO and other U.S. allies boosting defense spending, Eric Mendelson said Blue is “uniquely positioned” to support both the Heico businesses selling into those markets and many of the OEMs they support.
NATO member states are moving toward a new defense spending target of 5% of GDP—up from the current 2%—ahead of the alliance’s June summit, Secretary-General Mark Rutte said on May 26.
Victor Mendelson downplayed the possibility—raised by some analysts given tensions between the Trump administration and Washington’s European allies—that U.S. defense sales to Europe could fall. “We have European-destined content that goes to U.S. primes. And as the Europeans are spooling up, they are continuing to buy equipment from U.S. and U.S. primes. And I don’t think that’s going away so quickly either,” he said.
Mikus said Heico’s 2022 acquisition of Exxelia, a French designer and manufacturer of high-reliability passive components and precision subsystems, “provides the company with a European manufacturing footprint to support Europe’s rearmament.”
Analysts expect that Heico will remain on the hunt for mergers and acquisitions (M&A) targets in line with its long-running penchant for strategic deals.
“The company has plenty of firepower for additional deals,” Robert Stallard of Vertical Research Partners said in a May 28 client note.
Ken Herbert of RBC Capital Markets said in a May 27 client note that Heico’s steady free cash flow generation “is a positive for potential M&A and further deleveraging.”
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