HEICO Flying

Sometimes it pays for investors to turn over a lot of rocks. Aerospace parts and electronic components maker HEICO (NYSE:HEI) does not get a lot of attention and seldom makes the headlines of the major financial press, but that has not kept the company from doing a consistently good job of generating returns on capital or overall growth. With the airline industry in better health these days, investors have taken notice of HEICO's positive qualities and pushed the stock up more than 75% over the past year. 

Another Good Quarter
HEI delivered a solid end to its fiscal year, with quarterly revenue growth of about 18% that topped the high end of analyst estimates. The company's flight support business (the parts business) saw top line growth of 14%, while the electronic technologies division posted 27% reported growth and 7% organic growth. There was no real magic bullet to the growth in this quarter, rather it was more a product of improving markets and the company's execution.

HEI also did well in moving that extra revenue through to higher profitability. The company saw gross margin improve by more than 200 basis points, though higher SG&A spending depleted some of that benefit. Overall, operating income rose 23% for the quarter, as operating margin improved by about 70 basis points. Growth was relatively balanced between the two segments (flight support up 28%, electronics up 20%), though the electronics business is much more profitable as a percentage of sales. (For more, see The Bottom Line On Margins.)

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