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HEICO (HEI) Q2 Earnings Beat Estimates, Revenues Fall Y/Y

Zacks Equity Research

HEICO Corporation HEI reported second-quarter fiscal 2020 earnings of 55 cents per share, which surpassed the Zacks Consensus Estimate of 42 cents by 31%. The bottom line however declined 8.3% from the prior-year quarter’s figure of 60 cents.

The downturncan be attributed to decline in quarterly sales as well as operating income.

Total Sales

Quarterly net sales of $468.1 million beat the Zacks Consensus Estimate of $448 million by 4.5%. The top line however declined 9.2% from the year-ago quarter’s figure of $515.6 million due to lower revenues generated by the company’s Flight Support Group segment.

Heico Corporation Price, Consensus and EPS Surprise

Heico Corporation Price, Consensus and EPS Surprise

Heico Corporation price-consensus-eps-surprise-chart | Heico Corporation Quote

Operational Update

HEICO’s total costs and expenses declined 9% year over year to $359.5 million in the quarter under review. The decrease was due to lower cost of sales as well as selling, general and administrative expenses.

Segmental Performance

Flight Support Group: Net sales declined 18.3% year over year to $252 million owing to lower demand across all of this segment’s product lines. This resulted from the significant decline in global commercial air travel beginning March 2020 due to the novel coronavirus outbreak.

Operating income decreased 24% year over year to $47.5 million, courtesy of sales decline and lower gross profit margin mainly within its aftermarket replacement parts and repair and overhaul parts and services product line. Also, its operating margin contracted130 basis points (bps) to 18.9% in the second quarter of fiscal 2020.

Electronic Technologies Group: Net sales rose 2% year over year to $219 million primarily owing to favorable impact of the company’s fiscal 2019 and 2020 acquisitions.

Operating income dropped 3% year over year to $65.5 million, primarily on account of lower gross profit margin mainly due to a decrease in net sales of space and commercial aerospace products.

The company’s operating margin was down 150 bps to 29.9% in the second quarter of fiscal 2020.

Financial Details

As of Apr 30, 2020, cash and cash equivalents totaled $346.8 million compared with $64 million as of Jan 31, 2020.

Long-term debt (net of current maturities) totaled $739.2 million as of Apr 30, 2020, up from $567.9 million as of Jan 31, 2020.

As of Apr 30, 2020, cash provided by operating activities was $205.9 million compared with $178.3 million as of Apr 30, 2019.

Fiscal 2020 Guidance

HEICO Corp withdrew its earlier announced fiscal 2020 financial guidance due to recent developments pertaining to the impact of the virus outbreak.

Zacks Rank

HEICO Corp currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Defense Releases

Lockheed Martin Corp. LMT, a Zacks Rank #3 company, reported first-quarter 2020 earnings of $6.08 per share, which surpassed the Zacks Consensus Estimate of $5.76 by 5.5%. The bottom line also improved 1.5% from the year-ago quarter’s $5.99.

General Dynamics Corporation GD, a Zacks Rank #3 company, reported first-quarter 2020 earnings from continuing operations of $2.43 per share, which missed the Zacks Consensus Estimate of $2.46 by 1.2%. Moreover, earnings declined 5.1% from $2.56 in the year-ago quarter.

L3Harris Technologies LHX, another Zacks Rank #3 company, posted first-quarter 2020 adjusted earnings of $2.80 per share, which surpassed the Zacks Consensus Estimate of $2.61 by 7.3%. The bottom line also increased 20.7% from the year-ago quarter’s $2.32.

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