HEICO's Record Quarter: All Engines Firing, but the Real Story Is Margin Expansion and M&A Firepower
Commercial aviation, defense, and space all grew double-digit organically; FSG margin guidance raised to 24-26%, and the acquisition pipeline remains full.
HEI · Earnings Call · 2026-05-28
Record Results Across the Board
HEICO's fiscal second quarter was a clean sweep: consolidated net sales rose 25% to a record $1.4 billion, operating income jumped 41%, and net income climbed 49% to $233.8 million. The two operating segments both set all-time records, with the Flight Support Group (FSG) posting 19% organic growth and the Electronic Technologies Group (ETG) 17% organic growth. As Victor Mendelson put it, “business is very strong for us virtually across the board, including in our biggest markets, commercial aviation, defense and space.” — Victor Mendelson, Co-Chairman and Co-Chief Executive Officer · 2026-05-28 This breadth is striking: it is not just one end market carrying the company. The defense side, in particular, is accelerating on record backlogs, while the commercial aftermarket remains robust despite the market share gain narrative that has become a recurring theme.Margin Expansion and a Quiet Guidance Change
The more intriguing development is the margin trajectory. FSG operating margin hit 26.2%, up from 24.1% a year ago, and management lifted its expected range. CFO Carlos Macau, who last December guided to 23.5%–24.5% for FSG, now says, “I continue to believe that the FSG is going to play between 23.5% and 24.5% GAAP operating margins.” — Carlos Macau, Chief Financial Officer (CFO) · 2025-12-19 That was the old view. On this call he revised it: “we were blessed with the quarter where all the verticals or industry place had double-digit organic growth.” — Carlos Macau, executive · 2026-05-28 He explicitly raised the range to 24%–26%, citing a more stable mix from the Component repair business and a favorable defense-heavy specialty products mix. The company also disclosed that FSG's cash margin (EBITA) was 28.6%, 160 basis points higher year over year. This is not a one-off: management believes the fixed-cost leverage and the expansion of PMA/DER-friendly repairs are durable. For ETG, Victor repeated the same range as three months ago: “we continue to expect 22% to 24% GAAP margins.” — Victor Mendelson, Co-Chairman and Co-CEO · 2026-02-26 The difference is that the cash margin (before intangibles) reached 30.6%, a 390bps improvement.M&A and Capital Allocation: A Full Pipeline
HEICO closed two acquisitions in April – Sherwood Avionics (FSG) and Southwest Antennas (ETG) – and Victor described the pipeline as "excellent potential acquisitions, both large and small." The company continues to lean into its reputation as a "buyer of choice" for founder-led businesses. Eric Mendelson emphasized the cultural advantage: “All of our businesses are intended to be owned in perpetuity.” — Eric Mendelson, Co-Chief Executive Officer · 2026-05-28 That differentiator is central to the strategy. Total Revenue rose 25% to $1.38B, and the balance sheet, with net debt at 1.74x EBITDA, gives ample firepower for further deals. The company is also exploring a potential shift to semiannual reporting, a topic that generated discussion but no decision.The 'Peak Aftermarket' Debate
Analysts pressed on whether the aftermarket can avoid a cliff. Eric was blunt:He argued that newer generation equipment is far more expensive to maintain, and HEICO's expanding catalog plus DER repairs will keep the growth engine running. This is a company that has consistently outgrown the market, and the defense side – including missile defense hardware and the rising defense tech sector – adds another leg.If you continue doing what you've done in the past, you'll get the same thing... the definition of insanity is trying the same thing over and over again, expecting different results.