Heico stock, the current leader in the aerospace and defense industry group, is forming a cup-with-handle base. The stock is 2% away from a buy point at 270.37 after shares climbed 1.8% in morning trading.
Volume has quieted as the handle forms, which is a good sign. The relative strength line is near new highs, another plus, according to its IBD MarketSurge charts.
Heico stock declined as much as 24% as it formed its current base. While that's not an excessive drop, it was enough to undercut a prior base that formed from late September into November. That reset Heico's base count, providing a good foundation for a future price advance.
Besides having a well-formed base, Heico stock has some of the best IBD ratings in the aerospace and defense industry group. Its Composite Rating of 99 is the highest among 71 stocks in the group. Its EPS Rating is fifth highest in the group.
In terms of 12-month price performance, the stock is outperforming industry heavyweights such as GE Aerospace and General Dynamics.
Heico, which makes and services aircraft equipment, serves the majority of the world's airlines and overhaul shops. It also works with multiple defense and space companies and militaries around the globe, in addition to some health care and electronics manufacturers.
Heico Stock Surged On Quarterly Report
The stock shot up nearly 14% in more than double its average volume Feb. 27 after the January-quarter report blew by expectations. Heico earned $1.20 a share, well above the consensus of 95 cents and the highest estimate of $1.04, according to FactSet. Sales of $1.03 billion exceeded expectations for $979.7 million.
The company's Flight Support Group saw quarterly operating income rise 22% on 15% higher net sales vs. the year-ago quarter. Aftermarket replacement parts and repair and overhaul parts and services saw strong results. Acquisitions are bearing fruit, too.
Earnings growth accelerated from 16% to 31%, 34% and 39% the past few quarters, according to IBD MarketSurge. Sales growth has slowed, however, from 44% to 39%, 37%, 8% and 15% the past five quarters.
Heico stock has a three-year EPS growth rate of 19% and three-year sales growth rate of 31%, according to IBD Stock Checkup.
IBD's aerospace and defense industry group is in the top 10 out of 197 groups. The group is rising largely on the strength of European defense stocks. That helps explain why Heico stock has a Relative Strength Rating that's 86, yet it's only 25th best in the group. Germany-based Rheinetall has the group's top RS Rating, 99. U.K.-based BAE Systems has a 94 RS Rating.
Heico Class A Shares Also Basing
Heico stock class A shares trade under the symbol HEIA and also are forming a cup-with-handle base. But average daily volume on HEIA is 252,400 vs 582,200 for HEI stock
Heico stock's average true range is 2.97, according to MarketSurge.
IBD currently suggests stocks with average true range (ATR) of 3 or lower. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior.
Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
