Heico is the IBD Stock Of The Day for Tuesday as shares of the jet engine and defense components supplier close in on a buy point. Investment guru Warren Buffett earlier this summer opened up a new position in Heico and loaded up on shares.
Hollywood, Fla.-based Heico produces parts, electronics and control and test systems for customers in the defense and aerospace industries. The company's products are found on a variety of industrial turbines, targeting systems, missiles and electro-optical devices.
Heico's earnings growth rebounded over the last three quarters, to a 31% gain for its Q3 report in August, after slowing to a 6% increase in Q4 of last year. The defense contractor averaged 43.5% revenue growth over that period, driven by strong demand for aftermarket parts within its Flight Support Group division. However, sales growth decelerated modestly to a 37% gain for its most recent report.
Still, Heico's roughly 36% gain in 2024 through the beginning of August was enough to pique the interest of investment oracle Buffett.
Berkshire Hathaway, Warren Buffett's investment firm, bought shares of Heico and Ulta Beauty during the second quarter, according to the fund's regulatory filings tracked by whalewisdom.com.
Berkshire purchased 1.044 million shares of HEI in Q2 at around 165 per share, with a market value of over $185.37 million, whalewisdom data shows. Still, Heico only makes up 0.07% of Berkshire's portfolio. Apple dominates as the top holding at 31%, even after Buffett halved his holdings during the quarter. American Express and Bank of America rank second and third, representing 12.9% and 11.9% of the portfolio, respectively.
For Heico's upcoming Q4 results, FactSet analysts expect earnings to increase 32% to 98 cents per share on 10.5% revenue growth to $1.03 billion, which would mark a quarterly record.
Heico Stock
Heico stock is trading below a 269.38 buy point for a flat base. The buy point is the stock's record high from Sept. 23.
Aggressive investors could also use Monday's high of 264.88 as an early trendline entry. A move above this level would snap a short downtrend.
HEI shares eased 1.3% Tuesday, after they rebounded above their 50-day moving average on Friday.
Heico stock has soared more than 45% so far this year.
Heico leads the Aerospace/Defense Group according to the IBD Stock Checkup. Shares have a near-perfect 98 Composite Rating out of a best-possible 99. The Composite Rating combines various technical indicators into one easy-to-read score.
HEI stock has a muscular 91 EPS Rating based on its earnings growth streak. Heico's relative strength line has fallen from late-September highs, but the stock still has a solid 83 RS Rating.
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