HEICO Buys Marway Power, Widens Power Distribution Solution Capacity

HEICO Corporation HEI recently signed a contract to acquire Marway Power Solutions, Inc. The acquiree provides the design and construction of power distribution solutions for mission-critical systems used in defense, aerospace, communications, test and measurement, and industrial applications on land, sea and air.

Per the deal, HEI bought 92.5% of Marway for cash. HEICO indicated that the transaction would be accretive to its earnings within one year of the buyout.

How Will the Buyout Benefit HEICO?

Marway's acquisition is expected to strengthen HEICO's footprint in the aerospace and defense industry, particularly in power distribution solutions for mission-critical systems. It develops and produces power distribution solutions in both standard rackmount and customized enclosures. Marway provides a variety of products, including transformers, switchgear and customized solutions adapted to specific sectors like defense, which are consistent with HEI's value-creating approach.

The aforementioned factors will provide HEICO Corporation with an opportunity to expand its customer base, enhance its product offerings and increase its market share in power distribution solutions for mission-critical systems business area.

What's Driving Acquisitions Among Aerospace Defense Players?

The military industry has seen a notable rise in mergers and acquisitions due to several factors, like the growing emphasis on cost-reduction initiatives, diversifying the portfolio to tackle competition and achieving economies of scale, along with operational efficiency to attain long-term goals. These transactions are becoming more significant, allowing businesses to grow as they see fit by expanding their operations, gaining access to new skills, developing technologies and producing higher-quality goods and services, as well as capturing larger market shares.

HEICO's latest decision to acquire Marway Power Solutions also seems to have been motivated by the aforementioned factors.

Some other defense companies have recently indulged in acquisition deals to expand their operations and widen product offerings.

In August 2024, Lockheed Martin Corp. LMT agreed to acquire a manufacturer of satellite products, Terran Orbital, for $450 million, which serves the aerospace and defense industry. Through this acquisition, LMT will be able to expand its customer base, enhance its product offerings and increase its market share in the satellite-based solutions business area.

Lockheed Martin has a long-term (three to five years) earnings growth rate of 4.7%. It delivered an average earnings surprise of 7.46% in the last four quarters.

In May 2024, TransDigm Group, Inc. TDG agreed to acquire Raptor Scientific for $655 million, a manufacturer of complex test and measurement solutions serving the aerospace and defense end markets. Through this acquisition, TDG should be able to provide a wider range of products and gain a larger market share in the highly engineered aviation components industry.

TransDigm Group has a long-term earnings growth rate of 20.7%. The Zacks Consensus Estimate for its fiscal 2024 sales calls for an improvement of 19.9% from the prior-year figure.

In April 2024, Curtiss-Wright Corporation CW completed the acquisition of WSC, Inc. for $34 million. The buyout is expected to expand Curtiss-Wright's portfolio of advanced commercial nuclear technologies utilized in the modernization of existing power plants and the design of new power plants, such as Advanced Small Modular Reactors.

Curtiss-Wright boasts a four-quarter earnings surprise of 11.52%, on average. The Zacks Consensus Estimate for CW's 2024 sales implies an improvement of 7.1% from the prior-year figure.

HEICO Stock Price Movement

In the past three months, shares of HEICO have risen 15% compared with the industry's growth of 12.5%.

Image Source: Zacks Investment Research

HEI's Zacks Rank

HEI currently carries a Zacks Rank #3 (Hold).

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