Heico Results Point To Commercial MRO's Growing Momentum

Credit: Nigel Howarth / AWST

Heico Corp.’s commercial aviation-focused Flight Support Group (FSG) has posted its fourth straight quarter of revenue growth, adding another data point that suggests increased flying is translating into a broader aftermarket recovery.

The company said net sales for the three months ended July 31, the company’s fiscal 2021 third quarter (Q3), were up 33% year-over-year to $237.1 million. Q3 2020 was the company’s hardest hit period during the pandemic.

The sales turnaround and a 250% jump in segment operating income “principally reflect increased demand for the majority of our commercial aerospace products and services resulting from some recovery in global commercial air travel as compared to the prior year,” said FSG President Eric Mendelson. “This marks the fourth consecutive quarter of sequential growth in net sales and operating income at the Flight Support Group.”

The Q3 sales figure represented a 3% sequential increase over Q2. That quarter saw sales jump 16% over Q1 (Aviation Week, May 26). 

Company executives cautioned on their Q2 earnings call that maintaining the 16% quarterly growth pace was unrealistic. The Q3 rate reflects a more realistic pace.

“I think in general the sales will continue to trend up,” CFO Carlos Macau said on an Aug. 25 earnings call. “We’ve said consistently for quite some time that we think it’s more of a linear pattern upward. That’s why we were surprised in Q2 with the growth in FSG. But I think we’ll continue this pace back up to 2019 levels towards the end of 2022.”

While the delta coronavirus variant is creating headwinds for travel demand, Heico said its Q3 sales were not affected.

“We have not seen a drop in business as a result of the delta variant thus far,” Macau said. “The Americas, in general, has been strong. Europe never saw really the recovery. Asia, ex-China, hasn’t seen the recovery. So I think that we’ve got a lot of wind to our backs.”

While the company’s sales are trending upward, Heico—like most of the commercial aviation industry—is still not back to pre-pandemic performance levels. The company’s Q3 fiscal 2019 sales were $320 million, or 26% higher than the most recent quarter.

Overall, Heico saw net sales increase 22% to $471.7 million in Q3, up from $386.4 million in Q3 of fiscal 2020. Net income rose 42%, from $54.3 million in Q3 2020 to $76.9 million in Q3 2021.

“Looking ahead to the remainder of fiscal 2021 and to fiscal 2022, we remain cautiously optimistic that the ongoing worldwide rollout of COVID-19 vaccines will positively influence commercial air travel and will benefit the markets we serve,” company President Laurans Mendelson said. “But as we’ve all learned, it is difficult to predict the pandemic’s path and effect, including factors like vaccination rates and new variants, which can impact our key markets.”

Citing the uncertainty, the company is not providing specific financial guidance.


Sean Broderick

Senior Air Transport & Safety Editor Sean Broderick covers aviation safety, MRO, and the airline business from Aviation Week Network's Washington, D.C. office.