Al Root
Sometimes the market gives investors a gift. They should take it.
That's the view of Vertical Research Partners analyst Rob Stallard, who urged investors to buy the post-earnings dip in shares of Heico.
On Wednesday evening, the aerospace parts manufacturer reported fiscal first-quarter earnings per share of $1.35, about seven cents ahead of Wall Street estimates.
The company's flight support division, which makes replacement parts for commercial aircraft, grew sales year over year by about 12% on a comparable basis.
Heico doesn't provide formal guidance, but management expects "continued sales momentum" in that and other business segments.
It all seemed fine. Shares, however, dropped more than 9% on Thursday.
"When you are a stock that has done as well as Heico, with the highest valuation in the Aerospace & Defense space, there is always the risk of expectations getting ahead of reality," wrote Stallard on Friday. "We think investors have reacted negatively to the free cash flow miss and the soft [segment] margin, even though both have been impacted by short-term issues. We would thus be using this sell-off as an opportune entry point for what has been a proven, successful compounder business model over the last 30-plus years."
A "compounder" is a Wall Street term for a company that has a history of successful capital deployment, typically with bolt-on acquisition, leading to consistent, strong earnings growth.
Stallard rates shares Buy and has a $403 price target for the stock.
He isn't alone. On Friday, Citi analyst John Godyn put a "upside 90-day catalyst watch" on Heico stock. That means he expects shares to rise over the coming three months.
"We believe recent weakness represents an attractive entry point into what we've described as a Best of Breed Megatrend Compounder, given the company's unusually long history of compounding value in Aerospace & Defense," wrote Godyn. The megatrend he sees is strong, lasting demand growth for commercial air travel. "Big picture, our constructive fundamental view on Heico is based on its dominant niche aftermarket position, robust M&A pipeline, cash generation, and diversified growth."
His price target for shares is $400.
Overall, Heico is a relatively popular stock on Wall Street, with 61% of analysts covering shares rating it Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Heico stock is about $375.
The biggest complaint about Heico might be its valuation. Shares trade for about 55 times earnings expected over the next 12 months. That's just about the same valuation as the stock had five years ago. Through midday trading, shares were up about 150% over that span. Earnings per share have risen from $2.29 to $4.90.
Heico stock was up 1.6% in midday trading on Friday, while the S&P 500 and Dow Jones Industrial Average were down 0.6% and 1.2%, respectively.
Write to Al Root at allen.root@dowjones.com
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February 27, 2026 11:37 ET (16:37 GMT)
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