HEI Stock: Will Increased Defense Spend Drive Heico to New Heights?

Headquartered in Hollywood, Florida, Heico Corporation [HEI] is a diversified international firm that designs, manufactures and sells products across the aerospace, defense and electronics sectors. 

It operates in two main segments: Flight Support Group (FSG), which primarily produces jet engine and other aircraft parts; and Electronic Technologies Group (ETG), which produces electro-optical, microwave and infrared components and systems. Its clients include military fleets, commercial airlines and key industrial players. 

Heico’s diversified revenue streams, strong fundamentals and recent acquisitions have attracted the attention of retail investors, especially as increased defense global spending has improved its prospects. 

After the company beat analyst estimates for Q3 2025 on August 25, what does the future hold for Heico?

Organic Growth and Acquisitions

Heico announced Q3 2025 results after markets closed on August 25, beating analyst earnings estimates by $0.12 and revenue estimates by $30m. 

The results included record net income of $177.3m, resulting in EPS of $1.26, as well as record operating income and net sales, the latter of which rose 15.9% year-over-year to $1.15bn. EBITDA also increased by 21% to $316.4m, while cash flow rose 8% to $231.2m. 

The results continue a trend set in Q2, when the company set its previous record for operating income and net sales. These enviable figures are thanks in part to strong organic growth in both key segments. FSG sales in particular recorded growth for 20 consecutive quarters on the back of continued aerospace demand. 

While the company has not yet provided guidance for Q4, management continues to forecast “strong cash flow from operations for fiscal 2025”.

In addition to strong organic growth, the company has made several strategic acquisitions. 

On July 24, Heico acquired Gables Engineering, a designer and manufacturer of avionics controls, for an undisclosed all-cash amount. In April, it also acquired in-flight entertainment display manufacturer Rosen Aviation, likewise for an undisclosed amount. Both acquisitions are expected to be accretive to earnings within the year, and represent the fifth and sixth such acquisitions since October 2024. 

On the Up

HEI stock’s trajectory may not feature the heady peaks and glum valleys of high-growth tech stocks, but its steady gains over recent decades are turning heads. 

The stock started off 2025 at a low point, recording at 52-week low of $216.68 on February 19. This trough was due to concerns regarding government spending and contracts, as well as FY 2025 outlook that failed to wow investors. Impressive Q1 results served to lift the stock 13.88% on February 27, helping it weather wider macroeconomic volatility in April.

HEI shares reached an all-time high of $338.92 on August 5. They have since pulled back, trading at $305.34 on August 25. It remains to be seen if strong Q3 results will push the stock even higher. 

As of August 25, HEI stock was up 28.54% in the year to date, and up 23.86% in the past 12 months. 

Bullish on Defense: HEI vs HON vs LMT

Given its diversified revenue streams, it is difficult to identify direct competitors for Heico. That said, several key aviation and defense players provide a useful comparison, given how these sectors are driving Heico’s current growth. 

Honeywell International [HON] is a mainstay of the aerospace sector, although it also designs, manufactures and sells solutions for the industrial automation, building automation and energy segments. On its Q2 2025 earnings call in July, the company announced 5% growth in sales, driven by double-digit performance in the defense and space segments. Backlog also increased 10% to a record $36.6bn, although tariff-related cost inflation ate into free cash flow, which saw a drop of $100m from the previous year. The company also raised its guidance across the board, with full year sales projected at $40.8bn–41.3bn, and EPS at $110.45–10.65. 

Lockheed Martin [LMT], meanwhile, is another major aerospace and defense company, producing vehicles and technologies for defense applications, as well as cyber security and space solutions. The firm earns the majority of its revenues from government contracts. While the company is well-positioned to benefit from increased global defense spending, it disappointed investors in July when it missed earning expectations and reported $1.8bn in program charges in Q2, impacting operating profit. These charges were due both to schedule revisions and to geopolitical issues.

Source: Yahoo Finance

Of the three stocks, HEI is both the smallest in terms of market cap and the most expensive in comparison to its sales. However, it does offer higher growth margins, reflecting its capacity to expand.

HEI Stock: The Investment Case

The Bull Case for Heico

Strong cash flow, organic growth, strategic acquisitions and optimism around the wider defense sector could help boost HEI stock in the coming months. Analysts have also underscored the company’s strong financial health. 

In early July, BofA Securities boosted its price target for HEI stock from $320 to $355, with analysts expressing confidence in the firm’s ability to capture organic growth and capitalize on a robust aerospace aftermarket cycle, as well as offer clients relief from price increases elsewhere in the sector. The target represents a 16.26% increase from the August 25 close. 

Of the 20 analysts surveyed by Yahoo Finance in August, 11 rated HEI stock a ‘buy’ and two rated it a ‘strong buy’, with the average target price of $325 some 6.44% above the August 25 close. 

The Bear Case for Heico

Shares recorded an all-time high in early August. However, there are concerns that HEI stock has surpassed its fair value and could be due for a downward revision. Writing on Seeking Alpha prior to Q3 earnings, The Aerospace Forum’s Dhierin Bechai rated the stock a ‘hold’, arguing that the stock is trading well above its earnings, representing limited opportunity for further upside. 

Of the 20 analysts surveyed by Yahoo Finance in August, six rated it a ‘hold’, while one rated it a ‘sell’. The low price target of $240 represents a pullback of 21.4% from the August 25 close.

The company’s outlook will also serve as a key indicator of Heico’s prospects, as cautious guidance could spook investors amid continued concern over macroeconomic volatility and the stability of earnings from government contracts.

Conclusion

Strong organic growth, robust mergers and acquisition activity, and general optimism around the defense sectors could all help Heico expand in the coming months, with its strong financial foundation helping to support its long-term prospects. However, general macroeconomic volatility and concerns that HEI stock has already passed its fair value could mean it is due for a correction, especially if company guidance fails to meet elevated investor expectations.