Heico Q2 Earnings Call Highlights
Key Points
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- Heico posted record fiscal Q2 2026 results, with net income up 49% to $233.8 million and net sales up 25%, driven by strong demand in commercial aviation, defense and space plus recent acquisitions. Operating cash flow and EBITDA also hit records.
- Both business segments delivered strong growth and margin expansion. Flight Support Group sales rose 21% to a record $929.4 million with operating margin improving to 26.2%, while Electronic Technologies Group sales jumped 34% to a record $459.5 million and operating margin increased to 26.5%.
- Management said demand remains robust and acquisition momentum continues, citing record orders/backlogs, healthy defense and space demand, and a disciplined acquisition pipeline. Heico also completed two April acquisitions and expects them to be accretive within a year.
Heico (NYSE:HEI) reported record fiscal second-quarter 2026 results, with management citing strong demand across commercial aviation, defense and space, as well as contributions from recent acquisitions.
Co-Chairman and Co-Chief Executive Officer Victor Mendelson said the company is “firing on all engines,” pointing to record or near-record orders in most of its largest markets. He said commercial aviation demand remains strong, defense spending is benefiting from efforts by the U.S. and allied nations to replenish stocks, and space activity continues to expand across both traditional and newer programs.
For the quarter, Heico said consolidated net income rose 49% to a record $233.8 million, or $1.66 per diluted share, compared with $156.8 million, or $1.12 per diluted share, in the same period a year earlier. Victor Mendelson said consolidated operating income and net sales also reached records, increasing 41% and 25%, respectively, from the prior-year quarter.
Operating cash flow increased 43% to $292 million from $204.7 million a year earlier. Consolidated EBITDA rose 37% to $408.3 million from $297.7 million. The company’s net debt-to-EBITDA ratio was 1.74 times as of April 30, 2026, compared with 1.6 times as of Oct. 31, 2025, an increase management attributed to four acquisitions completed so far in fiscal 2026.
Flight Support Group Posts Record Sales and Margin Expansion
Co-Chairman and Co-Chief Executive Officer Eric Mendelson said the Flight Support Group’s net sales increased 21% to a record $929.4 million, up from $767.1 million in the prior-year quarter. Organic growth was 19%, with double-digit increases across all product lines.
Flight Support Group operating income rose 31% to a record $243.1 million, compared with $185 million a year earlier. Operating margin improved to 26.2% from 24.1%, reflecting higher sales volume, SG efficiencies and a more favorable product mix in aftermarket replacement parts.
Eric Mendelson said the group also benefited from some defense-related sales that were pulled forward at a customer’s request from later in the fiscal year. The pull-forward improved second-quarter operating margin by about 60 basis points and represented roughly $15 million to $20 million in sales, he later told analysts.
In response to a question from CJS Securities’ Larry Solow, Eric Mendelson said organic growth in the segment was about 22% in parts, 21% in specialty products and 10% in component repair. He said the repair business remained constrained by supply chain issues, adding that some assemblies cannot be completed if a single supplier part is unavailable.
Carlos Macau, Heico’s executive vice president and chief financial officer, said the company is also seeing more DER and PMA-friendly repairs following the Wencor acquisition, which can reduce reported revenue on certain repairs while improving profitability by using Heico parts instead of higher-priced OEM parts.
Electronic Technologies Group Also Sets Records
The Electronic Technologies Group generated record net sales of $459.5 million, up 34% from $342.2 million a year earlier. Organic growth was 17%, driven by increased demand for other electronics, defense, aerospace and space products, as well as contributions from acquisitions.
Operating income for the group increased 56% to a record $121.8 million from $77.9 million. Operating margin rose to 26.5% from 22.8%. Eric Mendelson said the group’s operating margin before acquisition-related intangibles amortization was 30.6%, with amortization reducing margin by about 410 basis points.
Management cautioned that the segment’s margins can be volatile because of shipping mix. Victor Mendelson said Heico continues to expect Electronic Technologies Group GAAP operating margins of 22% to 24% for fiscal 2026 based on the current portfolio.
Macau said all of the group’s verticals had double-digit organic growth in the quarter, which helped margins. He said that if the high growth continues, the segment could be toward the high end of the previously provided margin range, while emphasizing that management did not want to overpromise.
Defense, Space and Aftermarket Demand Remain Key Themes
Management described defense demand as broad-based. Macau said defense remained “just a tick under 30%” of consolidated sales and has been consistent, though he added the rest of the business is also keeping pace. Eric Mendelson said conversations about additional defense business remain strong, and Heico is positioned to serve both legacy programs and newer defense technology markets, including unmanned systems.
On space, Victor Mendelson said both defense and commercial space orders are strong, although the market has historically been somewhat volatile. He said backlogs and order flow remain supportive, referring to record backlogs and record orders.
Heico also noted that three subsidiaries — 3D PLUS, Exxelia and VPT — supplied mission-critical electronic components for NASA’s Artemis II mission.
In commercial aerospace aftermarket, Eric Mendelson pushed back on concerns about a “peak aftermarket” for Heico. He said those concerns are more relevant to parts trading businesses than to Heico, which focuses on proprietary parts, proprietary repairs, distribution and specialty manufacturing. He said customers are “clamoring for more parts” and that new-generation equipment is more expensive and available in greater quantities, creating opportunities for Heico’s product development efforts.
Asked about the impact of higher fuel prices and the conflict involving Iran, Eric Mendelson said the company has seen some lower Middle East demand, but that the region is a relatively small portion of sales and the weakness has been offset elsewhere. He said customers have approached Heico about PMA parts and new product development ideas.
Acquisitions and Outlook
Heico completed two acquisitions in April. The Flight Support Group acquired 80% of Sherwood Avionics and Accessories, an FAA and EASA Part 145 repair station focused on complex mechanical and electromechanical components for defense and select commercial aviation platforms. The Electronic Technologies Group acquired 90% of Southwest Antennas, a designer and manufacturer of rugged, mission-critical antennas primarily for ground-based defense and law enforcement applications.
Victor Mendelson said both acquisitions are expected to be accretive to earnings within the year following purchase. He also said Heico has a “healthy pipeline” of potential acquisition opportunities across both operating segments and will remain disciplined.
For the remainder of fiscal 2026, management said it expects increased sales in both the Flight Support Group and Electronic Technologies Group, supported by underlying product demand and recent acquisitions. Macau said the Flight Support Group’s margin potential is now likely in a 24% to 26% range, depending on mix in any given quarter.
Management also said Heico is introducing roughly 500 PMA parts annually, with the ability to do more, while weighing the number of new parts against the potential value of each product opportunity.
About Heico (NYSE:HEI)
HEICO Corporation is an aerospace, defense and electronics company that designs, manufactures, and sells a range of products and provides repair and aftermarket services. Headquartered in Hollywood, Florida, HEICO supplies replacement components, repair services and engineered systems for commercial and business aviation, military and space markets as well as for selected industrial and medical customers. The company's offerings are focused on sustaining and improving the reliability and availability of complex equipment across its end markets.
HEICO operates through two principal business areas.
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