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Call sheet · Q1'26

HEICO (HEI)

Q1'26 earnings call · held February 26, 2026 · compared with the Q4'25 call · management-credibility review
7/12
Disclosure score
4 medium, 3 low flags
Financial quality
Bottom line
The real story everyone's missing is HEICO's quiet entry into the AI power generation aftermarket through Ethos - this positions them in a massive new end market as data centers drive industrial gas turbine demand. Yes, the obvious headline is ETG margins collapsing 330 bps, but that's mix-driven and temporary per management's 'second half recovery' guidance. The binding constraint is actually management visibility - they stopped giving ETG guidance and widened FSG margin ranges, suggesting the business is getting harder to predict. Eric's most telling quote: 'The organic growth has surprised me... we don't give guidance because we don't know where it's going to be.' My view changes if ETG margins don't recover by Q3 or if FSG organic growth drops below 10% - that would signal the post-COVID aftermarket supercycle is ending.

The 30-second version

  • The Industrial Gas Turbine play is the real sleeper story here
  • FSG organic growth of 12% on brutal comps, but ETG margins collapsed 330 bps
  • They stopped giving specific organic growth guidance and Carlos is hedging on FSG margins

What changed this quarter

MetricQ4'25Q1'26Change
Consolidated Net Income$168.0M (+20% YoY Q1 '25)$190.2M (+13% YoY)700 bps deceleration in growth rate
FSG Net Sales$691.8M (+21% YoY Q4 '24)$820.0M (+15% YoY)600 bps deceleration but still strong double-digit
FSG Operating Margin22.3% in Q4 '24, up 180 bps YoY24.5%, up 120 bps YoYContinued expansion, 220 bps sequential gain
ETG Net Sales$336.2M (+14% YoY Q4 '24)$370.7M (+12% YoY)200 bps deceleration, but organic growth held at 6%
ETG Operating Margin24.3% in Q4 '24, down 100 bps YoY19.8%, down 330 bps YoYMassive 450 bps sequential drop
Consolidated EBITDA$264.0M (+26% YoY Q4 '24)$312.0M (+14% YoY)1200 bps growth deceleration
Operating Cash Flow$295.3M (+44% YoY Q4 '24)$178.6M (negative impact from $22.7M LCP distribution)Significantly lower but LCP distributions are cash neutral
Net Debt to EBITDA1.60x at Oct 31 '251.79x at Jan 31 '2619 bps increase due to acquisition activity
FSG Organic Growth16% in Q4 '2512% in Q1 '26400 bps deceleration but strong absolute level
ETG Organic Growth7% in Q4 '256% in Q1 '26100 bps deceleration, now single-digit

Accountability tracked

7 new promises made5 narrative shifts flagged6 prior promises scored
Inside the full report
The complete write-up covers the full promise ledger with kept/missed calls, disclosure-quality scoring, the metrics-vanished check, verification items, and the questions to ask next quarter.
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Scores, kept-promise rates, and flags on this site reflect the author's opinion, applying a stated methodology to statements management made on public earnings calls. Informational and educational purposes only - not investment advice, a recommendation, or an offer to buy or sell any security. Sources believed reliable but not guaranteed; the author may hold positions in the securities discussed.

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