Citi Launches Coverage of HEICO Corporation with Buy Rating, Targeting 20% Upside

Citi has formally initiated coverage of HEICO Corporation (HEI), assigning the stock a Buy rating and establishing a price target that implies approximately 20% potential appreciation from recent trading levels. The rating reflects the firm's view of HEI’s defensive business model and recurring revenue streams within the aerospace support services sector. HEI operates primarily in two segments: aerospace and electronics, with the latter serving defense and commercial markets. The firm points to HEI’s consistent free cash flow conversion, noting that the company generated $235 million in free cash flow over the trailing 12 months, representing a 21% conversion rate from net income. This efficiency is attributed to HEI’s asset-light model and strategic acquisitions that have expanded its footprint in high-growth aftermarket service areas. Citi also emphasizes HEI’s diversified customer base, which includes major commercial airlines and U.S. government agencies. Citi’s analysis indicates that HEI’s aftermarket business, which accounts for roughly 65% of total revenue, is benefiting from long-term aircraft fleets, rising maintenance demands, and supply chain constraints that favor integrated service providers. The firm forecasts 6% annual revenue growth over the next three years, supported by organic expansion and targeted M&A activity. The Buy rating and price target are expected to influence institutional investors and market sentiment toward HEI, potentially increasing trading volume and attracting new capital. The stock may also see upward pressure in the near term as analyst coverage gain momentum.