Sometimes high expectations can come back to bit a stock.
Aerospace aftermarket parts leader
Heico
(ticker: HEI) reported better-than-expected fiscal third-quarter sales and earnings late Monday. Shares are down anyway because investors wanted more.
Sales came in at about $723 million, up about 27% year over year. Wall Street was looking for about $702 million. Earnings per share came in at 74 cents, up about 23% year over year. Wall Street was looking for 73 cents.
Heico stock was down about 5.3% in premarket trading at $159, while
S&P 500
and
Dow Jones Industrial Average
futures are both up about 0.1%.
“While there is nothing wrong with double-digit revenue and earnings growth, we think that investors had been expecting more from Heico this quarter,” wrote Vertical Research Partners analyst Rob Stallard in a Tuesday report. “A high bar had been set by other aero aftermarket companies, and even when they exceeded 2Q [second quarter] forecasts some saw their shares trade off.”
He rates shares Buy and has a $200 price target for the stock.
TransDigm
(TDG) is one example. It beat quarterly sales and earnings estimates in early August. Its shares dropped about 3% in response. Investor expectations are up because more people are getting on planes coming out of the Covid-19 pandemic, a positive for commercial aerospace suppliers.
Heico is also a high-expectations growth stock. Shares trade for about 46 times estimated 2024 earnings. What’s more, Heico has beaten Wall Street’s bottom-line earnings in eight of the past 10 quarters. Shares dropped the day following three of the quarterly beats.
Management feels good about the quarter. “We are very pleased to report record quarterly consolidated net sales,” said CEO Laurans Mendelson in a news release. “These results reflect 12% consolidated organic growth in our net sales principally arising from a continued strong demand for our commercial aerospace products and services and the contributions from our fiscal 2023 and 2022 acquisitions.”
Management hosts an earnings conference call on Tuesday morning at 9 a.m. Eastern time to discuss fiscal third-quarter results.
Coming into Tuesday trading, Heico shares are up about 9% so far this year and up about 8% over the past 12 months.
Write to Al Root at [email protected]
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