Why Heico Stock Is Falling Today

Heiko (HEY -1.88%) reported mixed results in its fiscal third quarter, beating earnings primarily due to a lower-than-expected tax rate. Investors were largely put off by the news, sending Heico shares down as much as 6% at the open and 3% at 10:30 a.m. ET.

Strong aerospace, disabled electronics

Heico is a manufacturer of electronics and other components for a variety of industries, with a focus on aerospace. The company earned $0.97 per share in the fiscal third quarter ended July 31, beating estimates of $0.92 per share. But revenue of $992.2 million was slightly below the $995 million estimate.

The aerospace business was the stronger of the two, with revenue up 15% year-over-year on strong demand for spare parts. Outside aerospace, revenue fell 1 percent from a year earlier due to slower sales of medical products and other electronics. Margins for both businesses were flat, up slightly from a year ago but down from the previous quarter.

Is Heico stock a buy?

Heico is a longtime market beater — up nearly 800% over the past decade — that was thrust into the spotlight earlier this month when Berkshire Hathaway disclosed that he had acquired shares. Berkshire’s interest is strong support, but those who bought as a result may need time to educate themselves on how the company works.

Like Berkshire, Heico manages the business for the long term and not quarterly. The company is a serial acquirer looking for components with strong demand that are not easily marketed. Dealmaking and exposure to various industries can make quarterly results choppy. Strong medical demand during the pandemic is still creating inventory and supply chain issues in that segment, which could impact near-term results.

For investors focused on the long term, nothing in the Heico report suggests trouble ahead.