Aerospace supplier Heico broke out of a flat base in heavy trading Monday. With shares now trading in a buy zone, the company is the IBD Stock of the Day. Heico stock rose more than 3% early Monday.
Aerospace and defense stocks are an IBD top-10 industry group, and Heico is one of four companies in that group with a perfect 99 Composite Rating. The company reports some of the best profit growth in the industry. EPS climbed 31%, 34%, 39% and 27% the past four quarters. Sales rose 37%, 8%, 15% and 15% over the same periods.
Heico serves both military and commercial aerospace markets. Designated a Department of Defense Prime Contractor, the company provides support to government programs such as aircraft engine parts and repair services.
Its missile defense manufacturing business is "experiencing significant growth, driven by increasing demand from the U.S. and its allies," Co-CEO Eric Mendelson told analysts in the May 27 earnings call.
The company is also a big repair shop for airlines. Last month, Heico acquired Gables Engineering, which makes avionics controls, including touch screen cockpit displays for the Boeing 737 MAX. Heico's Flight Support Group, which provides aircraft maintenance and components, took credit for much of the April quarter's performance.
Victor Mendelson, co-CEO and brother of Eric Mendelson, told analysts the company is seeing accelerating growth in its European operations, especially in the defense sector.
Warren Buffett Holds Heico Stock
With more than 1,000 mutual funds owning shares, Heico has plenty of institutional support. Warren Buffett's Berkshire Hathaway took a stake in Heico last year. In a May 15 SEC filing, Berkshire reported it owned 1,162,088 shares. Heico has 138.9 million shares outstanding, according to IBD MarketSurge.
Last month, Morgan Stanley raised the price target on Heico to 330 from 305 and kept an equal weight rating. The firm noted that the aerospace supply chain continues to improve, while Boeing has momentum and air travel demand persists. All that continues to favor the industry, TheFly.com reported.
Analysts' consensus earnings estimate for the quarter ended in July is $1.15 a share, up 18.7%, according to FactSet. Sales are expected to rise 12.3% to $1.113 billion year over year.
Heico In Buy Zone
Heico stock jumped more than 3% in heavy volume Monday, topping the 328.63 buy point of a flat base. The buy zone goes to 345.06. The relative strength line is also making new highs, a bullish sign noted with a blue dot on its weekly IBD MarketSurge chart.
Heico has a 90 Relative Strength Rating, after rallying more than 40% year to date and 55% from the stock's low in February. Shares began a long-term advance with a breakout to new highs in December 2023. Since then, the stock has climbed more than 80%.
While the advance is already plenty long, Heico reset its base count when it made a deeper base that formed from late November 2024 to the February 2025 low. That means the latest breakout is from a safer early-stage pattern.
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Moreover, Heico's flat base exhibited two bullish traits. First, the stock found support at its 10-week moving average. Second, trading was tight, with back-to-back weeks in which shares closed only 0.4% higher.
Heico stock has a 21-day average true range (ATR) of 1.81%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
