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HEICO (HEI +7%) is making a nice move higher after reporting strong Q3 (Jul) earnings results last night. This supplier of aircraft components beat handily on EPS. The standout metric was revenue jumping 15.7% yr/yr to $1.15 bln, its highest year/year revenue growth in the past four quarters.

• Its Flight Support Group segment, which sells jet engine and aircraft component replacement parts and is Heico's larger segment, saw sales increase 18% yr/yr to a record $802.7 mln in Q3. Segment results were fueled by continued growth and momentum in its aerospace aftermarket business. This segment has now achieved 20 consecutive quarters of sequential sales growth.
• The parts business grew in the low teens, pretty similar to Q2. Where Heico saw some really nice some growth was in its repair and overhaul and specialty products group. Repair and overhaul was up in the mid-teens, which helped gross margin. Also, Heico explained that its repair business is pretty much a parts play. Heico does not have hangars and it does not repair airplanes, but it sells components and that was a nice surprise during the quarter.
• Heico noted that President Trump's focus on defense and cost efficiency bodes well for the company. Heico feels it's well-positioned for this dynamic, given its lower cost, alternative aircraft replacement parts. This helps the government and taxpayers save money. Also, its Missile Defense Manufacturing business is experiencing significant growth driven by increased demand in both the US and its allies. Heico enjoys a substantial backlog of defense, missile defense orders and ongoing shortages.
• Its Electronic Technologies Group segment sells various types of electronic, data and microwave, and electro-optical products. Segment sales grew 10% yr/yr to a record $355.9 mln, fueled by sustained demand for most products, highlighted by strong organic sales growth for its other electronics, defense, and space products. Segment operating margin dipped to 22.8% from 23.5% a year ago, principally due to higher SG&A expenses caused by higher performance-based compensation expense.

Overall, this was a solid quarter for Heico. The stock had initially been up only slightly. However, once the earnings call started this morning, the stock really started to pick up following some bullish comments on the call. Its repair and overhaul business really performed well and should continue to perform well given the government's renewed focus on efficiency. Finally, the stock gapped higher following its Q2 report in late May, but stalled out, trading mostly sideways the last two months. This report has sparked another move higher.