If you own a smartphone, you have likely had to replace your charging cable. Two options were available to you: buy the manufacturer's official model or turn to a generic brand, which is much cheaper. This is precisely Heico's model, but applied to aerospace and defense. This American company markets replacement parts that are more affordable than those from Original Equipment Manufacturers (OEMs). Less expensive, indeed, but without compromising on quality: its products obtain all the required regulatory certifications.
A strategy that has proven particularly successful over the years. Today, Heico has more than 19,500 FAA-approved (Federal Aviation Administration) parts and adds 500 new ones each year. This growth is reflected on Wall Street: in ten years, the stock has increased more than 11-fold.
Behind these years of continuous growth lies unique expertise. US-based Heico is the world's leading supplier of replacement parts and repair solutions for the aerospace industry. Its leadership is such that all the world's major airlines are now amongst its customers. Far from being limited to the simple sale of components, the company has diversified its model by establishing itself in maintenance. Grouped within the "Flight Support Group" division, these two activities generate 69% of revenue.
For carriers, aircraft maintenance represents one of the biggest expense items, second only to jet fuel. Naturally, logic would dictate that a Pratt & Whitney engine owner would turn to its manufacturer for maintenance. But in reality, OEM lead times and costs often prove high. Much like in the automotive sector, airlines sometimes prefer to entrust their aircraft to an independent repairer, using certified parts and significantly streamlined costs.
Heico's success, however, rests on a more subtle mechanism. A traditional engine manufacturer, such as MTU or Rolls-Royce, generates little or no margin on the initial sale of an engine: its profitability is built later, during overhaul phases. Heico therefore benefits from an ideal positioning in an aircraft's life cycle by exposing itself exclusively to this lucrative phase. Another major asset is that the group avoids the industrial and financial risks associated with new engine launches. These launches can sometimes prove catastrophic, as illustrated by Pratt & Whitney in recent years. Finally, to maximize this annuity, Heico has specialized in wear parts that need to be replaced frequently, thus ensuring regular and highly predictable revenue.
The remaining 31% is attributable to the Electronic Technologies Group division, which provides components for defense, space, and aerospace. This segment also supplies industries such as healthcare with high-voltage generators for medical scanners. In recent years, the gap has widened between the group's activities. While they were almost on equal footing in the past, the "Flight Support Group" division took off starting in 2022 and has since posted solid annual growth.
Now present in over 120 countries, Heico generates 62% of its sales in its domestic market. The remaining 38% comes from international markets, without a detailed breakdown by the company: no single country exceeds the 10% regulatory threshold set by the SEC, which legally exempts it from doing so.
Outside the United States, France is the primary host for the group's long-term assets (factories, buildings, machinery). At certain times, over 10% of these assets were located there. This strong industrial footprint reflects France's leading role in global aerospace. By establishing a massive presence in France, HEICO positions itself at the heart of the decision-making process for Airbus and its ecosystem of Tier 1 suppliers (such as Safran or Thales), thereby securing its distribution channels in the European market.
A change of category: the post-2021 surge
While earnings growth remained modest prior to 2021, the dynamic has radically changed in recent years. The Flight Support Group (FSG) division, in particular, has taken off, driven by two key factors.
The first is cyclical: the aerospace market is going through a period of turbulence. Since 2022, manufacturers Boeing and Airbus have accumulated delivery delays, a situation exacerbated by the Pratt & Whitney GTF engine crisis. Faced with this shortage of new models, airlines have no choice but to extend the operation of their aging fleets. These aircraft require intensive maintenance. However, entrusting this maintenance to OEMs, who are already at capacity, is proving unfeasible. Airlines are therefore turning to independent repairers like Heico.
Although positioned in a competitive sector, the American group changed dimension in 2023 thanks to the largest acquisition in its history: the purchase of Wencor Group for nearly $2bn. At the time, Wencor was one of its main independent rivals in the replacement parts and maintenance market. This integration into the FSG division mechanically boosted Heico's revenue, allowing it to deploy a catalog of unequaled depth compared to OEMs.
In the wake of these operations, revenue recorded sustained growth of 34% in 2023, then 29% in 2024. The operating margin has remained around its historical level of 20%, with an upward trend for the coming fiscal years. On the other hand, the net margin shows a slight decline over 2022-2023, a direct consequence of the Wencor acquisition, which caused interest expense to jump from $6m in 2022 to $149m in 2024.
On the balance sheet side, the situation is tightening. The explosion of financial leverage in 2023 has weighed heavily on the cash-to-debt ratio, which has remained negative since 2016. The group clearly favors debt financing, but this strategy does not hinder its cash generation: free cash flows are expected to reach $924m in 2026. This momentum will allow for the cleaning up of accounts that are currently weighed down, with financial leverage expected to fall below 0.5 by 2028.
Capital allocation remains massively oriented toward acquisitions. While they are the group's strength, they weigh on its balance sheet year after year. In 2025 alone, the company dedicated $629.8m net in cash to them, eclipsing traditional capital expenditures, which were limited to $72.9m. In this context, shareholder returns appear almost symbolic compared to overall results: only $32m in dividends were paid in 2025. The group nevertheless maintains a historical consistency, boasting an uninterrupted semi-annual payment for nearly 50 years.
A tight market
Heico's success is based on a simple model: offering parts and maintenance services at a lower cost than original components. Faced with this competition, manufacturers are fighting back. Their main weapon, and the greatest long-term risk for Heico, lies in the contractual locking of the market.
When an engine manufacturer sells new equipment, it generally pushes the airline to sign an exclusive maintenance contract over several years, immediately bypassing Heico's model. Added to this is the practice of "bundling": in exchange for a discount on the purchase or lease of aircraft, airlines commit to using only the manufacturer's parts. If this method becomes widespread, Heico's price advantage becomes obsolete. It is a logic similar to that of the automotive industry: if maintenance is performed outside the official network, the warranty is voided.
Despite these threats, the group's momentum remains favorable, as manufacturers are not currently in a position of strength. In addition, the market has fully anticipated this growth potential. As a result, the stock has displayed a very high P/E multiple for several years now, currently depriving investors of any obvious entry point.
The risk-reward profile remains generally high. While the current trend is upward, the group's strategy could be disrupted. Two factors risk slowing this momentum: the normalization of the situation at manufacturers and recent decisions aimed at securing the market.
Despite these headwinds, the case deserves full attention. Heico benefits from a dominant position thanks to an offering that is now indispensable. According to the group, the use of its parts allows airlines to save approximately $25m each year. Investors would therefore be well advised to remain on the lookout over the coming months so as not to miss the appearance of an attractive entry point.
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