Heico Corporation (HEI): A High-Momentum Buy with Strong Earnings Revisions and Outperformance Potential

The aerospace and defense sector has long been a magnet for investors seeking resilient growth, and Heico Corporation (HEI) stands out as a prime example of a company leveraging industry tailwinds to deliver exceptional returns. As of August 2025, HEI holds a Zacks Rank of #2 (Buy) and a Momentum Style Score of B, a combination that historically signals strong near-term outperformance potential. This article examines how HEI's robust earnings revisions, strategic acquisitions, and momentum-driven price action make it a compelling candidate for investors targeting high-growth aerospace defense stocks.

Zacks Rank and Momentum: A Powerful Duet

The Zacks Rank system evaluates stocks based on earnings estimate revisions and historical performance, with a #2 (Buy) rating indicating strong institutional demand and favorable earnings trends. HEI's current #2 rank is supported by 23.4% projected earnings growth for 2025 and 13.2% revenue growth, driven by its dominance in aviation aftermarket services and electronic technologies. Over the past 60 days, six analysts revised HEI's earnings estimates upward, pushing the Zacks Consensus Estimate to $4.53 per share for fiscal 2025—a $0.11 increase from prior forecasts.

Complementing this is HEI's Momentum Style Score of B, which highlights its strong price performance. Shares have surged 35.97% in the past year, far outpacing the S&P 500's 10.37% gain. Over shorter timeframes, HEI's momentum is even more pronounced: a 15.71% monthly gain and 15.72% quarterly rise underscore its ability to capitalize on sector demand. This momentum is further reinforced by above-average trading volume, with 511,181 shares traded daily, signaling sustained institutional interest.

Earnings Revisions and Historical Outperformance

HEI's earnings surprise history is a critical factor in its investment appeal. Over the past four quarters, the company has exceeded consensus estimates four times, with an average surprise of 11.87%. For example, in Q2 2025, HEI reported EPS of $1.12, surpassing the Zacks Consensus Estimate of $1.02 by 9.8%. This track record of outperformance, combined with a 17.4% long-term earnings growth rate, positions HEI as a stock with both near-term and long-term upside.

Analysts have also revised estimates for future quarters. Zacks Research recently raised its Q4 2025 EPS estimate to $1.13 from $1.12, while projecting $5.03 per share for FY2026. These revisions reflect confidence in HEI's ability to sustain growth, particularly as it integrates recent acquisitions like Rosen Aviation and Millennium International, which have boosted sales in its Flight Support Group by 18.5% year-over-year.

Financial Fundamentals and Strategic Strength

HEI's financial health further solidifies its investment case. The company maintains a current ratio of 3.43, ROE of 15.88%, and ROIC of 9.95%, all well above industry averages. These metrics highlight its efficient capital allocation and profitability. Additionally, HEI's recent 10.0% dividend yield (after raising its semi-annual payout to $0.12 per share) adds income potential for shareholders.

Strategically, HEI's focus on high-margin aerospace and defense markets insulates it from broader economic volatility. Its Electronic Technologies Group, for instance, saw a 7.2% sales increase in Q2 2025, driven by demand for avionics and defense electronics. With global defense spending projected to rise, HEI's diversified revenue streams and technical expertise position it to benefit from long-term industry trends.

Investment Implications and Risks

While HEI's Zacks Rank of #2 and Momentum Score of B suggest strong near-term potential, investors should remain mindful of risks. A negative Earnings ESP of -3.74% indicates some analyst caution, as the Most Accurate Estimate has fallen below the Zacks Consensus Estimate. However, HEI's historical ability to beat expectations (despite this metric) suggests the risk of a miss is relatively low.

For investors, the key takeaway is to monitor HEI's August 25, 2025, earnings report, where the company is expected to report $1.12 per share and $1.11 billion in revenue. A positive surprise could catalyze further gains, while a miss might prompt a reevaluation of its momentum. Given its strong fundamentals and sector positioning, however, HEI remains a high-conviction buy for those seeking exposure to the aerospace defense sector.

Conclusion

Heico Corporation exemplifies the power of combining Zacks Rank and Momentum Style Score metrics to identify undervalued, high-growth stocks. With a #2 (Buy) rank, a B momentum score, and a history of outperforming estimates, HEI offers a compelling mix of earnings potential and price momentum. For investors willing to capitalize on aerospace and defense sector tailwinds, HEI represents a strategic opportunity to align with a company poised for sustained outperformance.