HEI Q3 Deep Dive: Aftermarket Growth, Margin Expansion, and Acquisition Momentum

Aerospace and defense company HEICO (NSYE:HEI) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 19.3% year on year to $1.21 billion. Its non-GAAP profit of $1.33 per share was 9.3% above analysts’ consensus estimates.

Is now the time to buy HEI? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

HEICO’s Q3 results were met with a positive market response, as the company delivered notable growth across both its Flight Support and Electronic Technologies segments. Management attributed the strong performance to broad-based demand for aftermarket parts and repair, with Co-CEO Eric Mendelson stating, “The value proposition that HEICO offers our customers has driven operating income primarily off of organic sales growth, while our customers remain very happy.” The company also benefited from recent acquisitions, which complemented its core organic growth, and ongoing efficiency improvements that supported higher operating margins.

Looking forward, HEICO’s management expects continued growth, driven by strong demand in both commercial aerospace and defense markets, as well as new acquisition opportunities. Co-CEO Victor Mendelson emphasized, “We anticipate net sales growth across both the Flight Support Group and the Electronic Technologies Group, driven by organic growth from increased demand for the majority of our products as well as growth through our recent acquisitions.” Management also highlighted a robust acquisition pipeline and ongoing investments in margin expansion, while cautioning that macroeconomic uncertainty and mix shifts could influence the pace of future gains.

Key Insights from Management’s Remarks

Management credited Q3's performance to strong aftermarket demand, broad-based product growth, and successful integration of recent acquisitions, especially in aerospace and defense markets.

• Aftermarket demand drives growth: The Flight Support Group saw increased demand for aftermarket parts and repair, with customers responding positively to HEICO’s expanded offerings, particularly following the Wencor acquisition.
• Defense and missile business momentum: The company highlighted significant growth in its missile defense manufacturing, supported by rising orders from U.S. and allied governments. Management noted that this segment benefits from global priorities for defense readiness and cost efficiency.
• Margin expansion from mix and efficiency: Higher operating margins in the Flight Support Group resulted from a favorable product mix—especially more profitable PMA (Parts Manufacturer Approval) and DER (Designated Engineering Representative) repairs—along with improved cost absorption and SG&A efficiencies.
• Acquisition activity remains strong: HEICO completed five acquisitions in the past year, with two more pending. These deals enhanced sales, earnings, and cash flow, and management expects accretive contributions within a year of closing.
• Decentralized structure supports execution: Management attributed performance to its decentralized operating model, allowing business units to respond quickly to customer needs and seize growth opportunities across both legacy and newly acquired operations.

Drivers of Future Performance

Management expects continued growth, supported by resilient aftermarket demand, ongoing acquisitions, and further operating margin expansion across key segments.

• Acquisitions to fuel expansion: The company maintains a robust pipeline of acquisition targets, with management stating they remain disciplined in pursuing only those meeting strict financial and strategic criteria. This approach is expected to drive both revenue and profit growth.
• Aftermarket and defense stability: HEICO sees durable demand for aftermarket parts as aging commercial and defense fleets continue to require maintenance and upgrades. The company’s broad product suite positions it to benefit from trends in aircraft utilization and defense spending.
• Margin opportunities and risks: Management identified further margin expansion potential through cost leverage and mix improvements, particularly in the Flight Support Group. However, they also acknowledged that shifts in product mix and macroeconomic variables could impact margins quarter to quarter.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be monitoring (1) integration progress and revenue contributions from newly acquired businesses such as EthosEnergy, (2) sustained aftermarket parts and repair demand amid evolving airline and defense fleet trends, and (3) margin performance in light of ongoing cost absorption and product mix changes. The pace of new product introductions and progress in defense-related opportunities will also be key factors to track.

HEICO currently trades at $329.34, up from $309.99 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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