Investment Thesis
HEICO (NYSE:HEI) is composed of two groups, the Flight Support Group and the Electronic Technologies Group. The Flight Support Group provides FAA approved parts and maintenance to the aircraft industry. Their parts and services encompass the entire aircraft including the engine; hydraulic, pneumatic and electromechanical components; avionics; structures; and wheel and brake systems. The Electronics Technologies Group produces electrical and electronic systems and components used in the aerospace, defense, communications, medical, security and computer markets.
Since the majority of the Flight Support Group’s revenue is from commercial airlines for parts and maintenance, as expected due to COVID, their business has decreased in full year FY20 (FY ending October 31, 2020). From November 2019 to early March 2020 (five months) airlines operated normally. Beginning in March 2020 decreased flights and airplane groundings impacted the need for parts and maintenance. The Flight Support Group did an admiral job of ending the year at “only” a 25% revenue reduction compared to FY19. Although Operating Income decreased by 41%.
The Electronics Technologies Group has a more diversified set of customers and thus had a less financial impact and in fact grew. The Group increased revenue by 5% and Operating Income by 5%.
HEI revenue in their FY20 was $1.8 billion, slightly down from FY19. The Flight Support Group has historically provided 60% of the corporate revenue but in 2020 in was 52% of the total revenue.
During the challenging FY20 HEI maintained their strategic objective of acquiring niche companies that fit their business.
The six acquisitions in FY20, described below, had a positive impact to the end of year Income Statement.
This article will drill down on the FY20 financial condition, review the six acquisitions and summarize key points for investor consideration going forward.
12 month stock chart as of Feb. 16
