Heico Tops Q3 Earnings Estimates; Warns On Higher Material And Labor Costs

Heico Corp HEI reported a Q3 FY23 revenue increase of 27% Y/Y to $722.9 million, beating the consensus of $701.7 million. 

Organic revenue rose 12% Y/Y on continued strong demand for commercial aerospace products and services and the contributions from FY23 and FY22 acquisitions.

Revenue from Flight Support Group (FTG) rose 23% Y/Y to $405.0 million, and Electronic Technologies Group (ETG) increased 33% Y/Y to $325.9 million in the quarter. 

Operating income grew 16% Y/Y to $149.4 million, with an operating margin of 20.7% vs. 22.6% a year ago. 

EPS of $0.74 beat the consensus of $0.72 in the quarter. 

Operating cash flow stood at $145.9 million in Q3 FY23.

As of July 31, 2023, cash and cash equivalents stood at $694.26 million. 

"As we look ahead to the remainder of fiscal 2023, we continue to anticipate net sales growth in both the FSG and ETG, principally driven by demand for the majority of our products. Additionally, continued inflationary pressures and lingering supply chain disruptions stemming from the COVID-19 pandemic may lead to higher material and labor costs. Further, we've begun the sharing of best practices, and getting to know the Wencor businesses which share a similar entrepreneurial culture and customer focus as HEICO's businesses," said Laurans A. Mendelson, Chairman and CEO. 

Earlier this month, HEI closed the buyout of Wencor Group from affiliates of Warburg Pincus LLC and Wencor's management for a total consideration of $2.05 billion. 

This is HEI's largest-ever acquisition, and Wencor joined the company's FTG business.

Looking ahead, the company continues to forecast strong cash flow from operations for fiscal 2023.

Price Action: HEI shares closed higher by 0.88% at $167.85 on Monday.