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Will ETG Segment Drive Heico Corp's (HEI) Earnings in Q4?

Zacks Equity Research

Heico Corp. HEI is set to release fourth-quarter fiscal 2019 results on Dec16, after market close.

In the last reported quarter, the company delivered a positive earnings surprise of 11.32%. Moreover, Heico’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 10.07%.

Sales growth in the company’s segments, particularly the Electronic Technologies Group (ETG) segment, is likely to show on its top line in the quarter to be reported.

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

ETG: A Key Catalyst

Heico has successfully completed seven acquisitions in the past year. In the last reported quarter, the ETG segment set an all-time quarterly net sales record, increasing 16% year over year. Majority of this upside was contributed by acquisitions. As the company continues to prioritize its merger and acquisition strategy, such trends might have positively impacted this segment’s fourth-quarter performance.

In line with this, the Zacks Consensus Estimate for the ETG segment’s revenues in the fiscal fourth quarter is pegged at $212 million, implying an 11% increase from the figure reported in the year-ago quarter. The consensus mark for the segment’s operating income is pegged at $63 million, suggesting 10.5% growth from the figure reported in the year-ago quarter.

Other Factors Under Consideration

Heico has been benefiting a great deal from robust business conditions and end markets. To this end, the company's end markets, primarily consisting of commercial aerospace, defense and space, remain healthy and are expected to have consistently provided a solid impetus to its growth trajectory.

We anticipate Heico’s to-be-reported quarterly results to duly reflect these factors. In line with this, the Zacks Consensus Estimate for fiscal fourth-quarter total revenues stands at $530 million, indicating a rise of 11.1% from the year-ago quarter’s reported figure.

During the month of July, Heico acquired substantially all of the assets of BERNIER, a France-based company, which later became part of its ETG unit. We anticipate the company’s soon-to-be-reported operating results to duly reflect the benefit of this acquisition.

Currently, the Zacks Consensus Estimate for Heico's fiscal fourth-quarter earnings is pegged at 57 cents per share, implying a 16.3% rise from the prior-year quarter’s reported figure.

What the Zacks Model Unveils

Our proven model does not predict an earnings beat for Heico this time around. 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. 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 a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Heico Corporation Price and EPS Surprise

Heico Corporation Price and EPS Surprise

Heico Corporation price-eps-surprise | Heico Corporation Quote

Recent Defense Releases

Northrop Grumman Corporation NOC reported third-quarter 2019 earnings of $5.49 per share, which surpassed the Zacks Consensus Estimate of $4.74 by 15.8%. However, the bottom line declined 22.8% from $7.11 per share reported in the year-ago quarter.

Lockheed Martin Corp LMT reported third-quarter 2019 earnings of $5.66 per share, which surpassed the Zacks Consensus Estimate of $5.03 by 12.5%. The bottom line also improved 10.1% from $5.14 in the year-ago quarter.

Hexcel Corporation HXL reported third-quarter 2019 earnings of 90 cents per share, which surpassed the Zacks Consensus Estimate of 89 cents by 1.1%. The bottom line also improved 12.5% from the prior-year quarter’s 80 cents.

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