Episode Details

HEICO Corporation (HEI) Q3 FY2026 — HEI went into the print at $351.05 and closed at $336.53 three sessions later, -4.1%, having set a 12-month closing high of $374.67 on August 14. The non-voting Class A (HEI.A) closed at $250.06, -2.7% over the same three sessions. HEICO reported record net sales of $1,413.1m (+23.1%), record operating income of $355.2m (+34.0%) and record net income attributable to HEICO of $235.4m (+32.8%), with diluted EPS of $1.67 against a $1.51 consensus - a beat on both lines. HEICO's own release put CONSOLIDATED ORGANIC growth at 14%. Nine of the 23 headline growth points were acquired, and HEICO spent $1,018m of cash on acquisitions in nine months to buy them. THE CALL: SELL (3/5, MODERATE) — base-case value ~$219.46 vs ~$336.53 today. KEY METRICS: - Net sales $1,413.1m, +23.1% YoY - a record, vs a $1,357.9m consensus - Diluted EPS $1.67 vs a $1.51 bar - a $0.16 beat; HEICO publishes no non-GAAP EPS, so bar and print share a basis - Consolidated ORGANIC net sales growth 14%, against the 23.1% headline - a 9.1-point acquired gap - Flight Support: sales $947.8m +18.1%, organic 12%, operating margin 25.88% (from 24.71%) - Electronic Technologies: sales $483.5m +35.9%, organic 18%, operating income +55.0%, margin 25.97% (from 22.76%) - Operating income $355.2m, +34.0%; consolidated operating margin 25.1% from 23.1% - TTM acquisitions $1,018m against $81m of capex - 12.6x, and 99% of free cash flow before M&A - Goodwill $4,356m plus intangibles $1,777m = 61.7% of $9,937m total assets; tangible equity is negative - Redeemable noncontrolling interests $617.9m, +32.2% in nine months; put rights start in fiscal 2031 - Net debt/EBITDA 1.57x (from 1.60x) after $550m of 4.950% 2031 notes and $650m of 5.400% 2036 notes - Shares: 55,241,647 HEI (one vote) + 84,515,758 HEI.A (1/10 vote) = 139.76m; market cap $39.72bn - Valuation: 46.9x TTM net income of $848m, 29.1x TTM EBITDA of $1,467m, 2.59% FCF yield before M&A - Our fair value $219 (bear $161, base $219, bull $274) vs $336.53 on HEI and $250.06 on HEI.A What to watch: Two more quarters of 18% organic growth at Electronic Technologies would make our fade too steep and is worth roughly $30-$40 of fair value. Flight Support organic below 12% in Q4, or acquisition spending rising again while the organic rate falls, confirms the bear case. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.