Will Solid ETG Segment Boost Heico's (HEI) Q1 Earnings?

Zacks Equity Research

Heico Corp. HEI is set to release first-quarter fiscal 2020 results on Feb 25, after market close. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average positive beat being 12.27%.

The company’s top line is likely to reflect sales growth across its segments, particularly the ETG Group segment, in the quarter to be reported.

Let’s take a detailed look at the factors that might have influenced Heico’s performance in the to-be-reported quarter.

Electronic Technologies Group (ETG): A Key Catalyst

During the fiscal first quarter, the company marked its sixth acquisition in a year’s time, wherein Heico's ETG segment acquired 80.1% stock of Quell Corporation in an all-cash transaction. Positive synergy from this acquisition and solid demand for the company’s product line is expected to have boosted the segment’s quarterly performance.

In line with such notable developments, the Zacks Consensus Estimate for the ETG Group segment’s fiscal first-quarter revenues is pegged at $195 million, reflecting an improvement of 5.7% from the prior-year quarter’s reported figure.

Other Factors under Consideration

Heico’s Flight Support segment has also been benefiting largely from robust business conditions and end markets. It is imperative to mention that the company’s end markets consisting primarily of commercial aerospace, defense and space, remain healthy, which are anticipated to have consistently provided solid impetus to Heico’s top-line growth.

Notably, the Zacks Consensus Estimate for the Flight Support Group segment’s fiscal first-quarter revenues is pegged at $314 million, reflecting an improvement of 9.3% from the prior-year quarter’s reported figure.

Considering the aforementioned developments, we anticipate Heico’s soon-to-be-reported results to reflect stellar top-line growth. In line with this, the Zacks Consensus Estimate for the fiscal first-quarter total revenues stands at $505.3 million, indicating a year-over-year rise of 8.5%.

In January 2020, Heico’s ETG Segment made another acquisition by purchasing all the business and assets of the Human-Machine Interface product line of Spectralux Corporation. The company expects this buyout, along with the Quell Corporation acquisition made in December, to be accretive to its earnings within a year. This, along with impressive revenue growth, will likely get reflected in the company’s fiscal first-quarter bottom-line numbers.

Currently, the Zacks Consensus Estimate for Heico's fiscal first-quarter earnings is pegged at 72 cents, suggesting a 46.9% surge from the year-earlier quarter’s reported figure.

Heico Corporation Price and EPS Surprise

Heico Corporation Price and EPS Surprise

Heico Corporation price-eps-surprise | Heico Corporation Quote

What the Zacks Model Unveils

Our proven model does not predict an earnings beat for Heico in the fiscal first quarter. The combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Heico has an Earnings ESP of 0.00% and currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Defense Releases

Teledyne Technologies Inc. TDY reported fourth-quarter 2019 adjusted earnings of $2.90 per share, which surpassed the Zacks Consensus Estimate of $2.76 by 5.1%. The bottom-line figure came above the guided range of $2.71-$2.76.

Lockheed Martin Corp. LMT posted earnings of $5.29 per share for the December-end quarter, beating the Zacks Consensus Estimate of $4.99 by 6%. The bottom line also improved 20.5% from the year-ago quarter’s $4.39.

Hexcel Corporation HXL reported adjusted earnings of 86 cents per share for the October-December quarter, surpassing the Zacks Consensus Estimate of 85 cents by 1.2%. Further, the bottom line improved 4.9% from the prior-year quarter’s 82 cents.

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