Why HEICO (HEI) Stock Is Declining Today

Tickers in this article: HEI

NEW YORK ( TheStreet) -- HEICO shares are down -4.5% to $51.95 on Wednesday after reporting third quarter revenue of $291 million, short of analysts expectations of $296.3 million.

The jet engine equipment manufacturer also reported earnings of 49 cents per diluted share, 5 cents higher than analysts were expecting.

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TheStreet Ratings team rates HEICO CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate HEICO CORP (HEI) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 1.2%. Since the same quarter one year prior, revenues rose by 18.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • HEICO CORP has improved earnings per share by 19.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HEICO CORP increased its bottom line by earning $1.52 versus $1.28 in the prior year. This year, the market expects an improvement in earnings ($3.50 versus $1.52).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Aerospace & Defense industry average. The net income increased by 19.7% when compared to the same quarter one year prior, going from $23.70 million to $28.37 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Aerospace & Defense industry and the overall market on the basis of return on equity, HEICO CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • 39.69% is the gross profit margin for HEICO CORP which we consider to be strong. Regardless of HEI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HEI's net profit margin of 10.05% compares favorably to the industry average.
  • You can view the full analysis from the report here: HEI Ratings Report

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