Shares of Heico (NYSE: HEI) jumped 10.1% in June, according to data provided by S&P Global Market Intelligence. Momentum sparked by the aerospace component manufacturer's late May earnings announcement continued to push the shares higher throughout the month. The climb was business as usual for Heico, one of the highfliers of the aerospace sector.
The surge goes back to the evening of May 28 when the company reported fiscal second-quarter net income that was up 37% year over year and sales that rose 20%, fueled by strong performances in its flight support and electronics operations.
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Management also upped full-year guidance, projecting net sales to grow 12% to 13%, up from previous guidance for 9% to 11% growth, and net income growth of 17% to 18%, up from 11% to 13%. CEO Laurans Mendelson on a post-earnings call with investors said to expect more of the same for the foreseeable future.
Mendelson said: "We anticipate net sales growth ... resulting from increased demand across majority of our product lines. We will also continue our commitments to develop new products and services, further market trend penetration, strong cash flow generation, and aggressive acquisition strategy while maintaining financial flexibility and strength."
Heico is a longtime outperformer, up nearly 400% over the past five years. That said, it's hard to pinpoint a time when management has sounded more optimistic. The company's businesses are generating strong organic growth, and with no significant debt maturities until 2023, Heico has ample capacity to do deals.
The stock is not cheap, trading at an enterprise value 36 times EBITDA, compared with 20 times for similarly well-regarded TransDigm. So it's hard to say whether the impressive stock run can continue. But if nothing else, Heico appears to have the wherewithal to grow into that valuation over time.
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