HEICO Corporation

Revenue drivers

• Flight Support Group (FSG) — Accounts for about 70% of fiscal 2025 net sales; sells aftermarket replacement parts, repair and overhaul services, and specialty products.
• Electronic Technologies Group (ETG) — Accounts for about 30% of fiscal 2025 net sales; sells electronic, data, microwave, and electro-optical products; roughly half of its sales go to military and defense customers.
• Aftermarket replacement parts — Part of FSG; generated the largest organic sales increase in the first half of fiscal 2026 (+$161.9 million).
• Other electronics, aerospace, and defense products — Part of ETG; drove organic growth in the first half of fiscal 2026 with increases of +$30.7M, +$21.8M, and +$19.9M respectively.

Recent performance

In Q2 fiscal 2026 (quarter ended April 30, 2026), net sales rose 25% to a record $1.376 billion, operating income up 41% to a record $350.4 million, and net income up 49% to a record $233.8 million ($1.66 diluted EPS). For the first six months of fiscal 2026, net sales up 20% to $2.554 billion, operating income up 29% to $610.3 million, and net income up 31% to $424.0 million ($3.01 diluted EPS). Consolidated organic net sales growth was over 18% in the quarter and 20% for the six months.

Strategy

Management emphasizes organic growth and accretive acquisitions to expand both segments. In the first six months of fiscal 2026, they completed four acquisitions (two in each segment) which contributed $36.1 million to FSG and $79.8 million to ETG net sales. Capital allocation is opportunistic, balancing organic investment with debt-funded acquisitions; the company completed acquisitions that increased total debt to net income ratio to 3.28x as of April 30, 2026. They continue to evaluate acquisition opportunities that fit strategic objectives.

Risks

• Acquisition integration risk — Recent and future acquisitions may not perform as expected or integrate successfully, which could hurt margins and growth.
• Leverage increase — Net debt to EBITDA rose to 1.74x as of April 30, 2026 (from 1.60x at fiscal year-end 2025) due to acquisition financing, potentially increasing financial risk.
• Dependence on defense spending — ETG derives roughly half of its sales from U.S. and foreign military agencies, making it sensitive to changes in defense budgets.
• Commercial aerospace volatility — FSG's aftermarket parts and repair services depend on air travel demand and fleet utilization, which can be affected by economic downturns or disruptions.

Outlook

Management expects increased net sales at both FSG and ETG for the remainder of fiscal 2026, supported by underlying demand and recent acquisitions. They intend to continue evaluating acquisition opportunities and maintain strong cash flow from operations. Their capital allocation stays focused on balancing organic growth with accretive acquisitions while maintaining liquidity.