Warren Buffett's favorite defense stock Heico (HEI) prepares to report earnings for its fiscal fourth quarter late Tuesday. In intraday trading, Heico stock fell below a key level.

Buffett-led Berkshire Hathaway (BRKB) opened and grew a position in aircraft parts supplier Heico this year.

The Florida-based company focuses on making niche replacement parts for commercial aircraft. In the defense market, the company produces niche components used in targeting and simulation equipment.

Heico Earnings

For the October quarter, analysts expect Heico earnings of 98 cents per share on revenue of $1.031 billion, FactSet shows. That would mark the company's first billion-dollar sales quarter. Year over year, Heico earnings would jump 32% as sales rise 10%. Though robust, sales growth would slow for the fourth consecutive quarter.

Heico is likely to offer a fiscal 2025 outlook. For the full year, analysts project Heico earnings of $4.28 a share, a 17% increase from 2024.

Investors will listen for progress on the aircraft components maker's recent acquisitions, including a specialty components maker and, separately, U.S. producers of jet cabin components and power distribution systems. They will also be tuned to any news suggesting that Heico is benefiting from Boeing's (BA) ongoing struggles, including its recent strike.

Warren Buffett Holding Heico Stock

Shares of Heico fell 1% in Tuesday's stock market action. Heico stock is trying to recover the 50-day moving average. A November breakout from a seven-week flat base has fizzled. The relative strength line has begun to trend lower after a sharp rally in the second and third quarters of this year. A rising RS line, the blue line in the chart shown, means that a stock is outperforming the S&P 500 index.

Howmet Aerospace (HWM), on the IBD 50 list of top growth stocks, also retreated. Howmet stock neared a test of the 50-day line on Tuesday.

Trade And Regulatory Impacts Under Trump

Morningstar analyst Nicolas Owens said on Nov. 11 that he is watching trade and regulatory impacts on the aerospace sector under incoming President Donald Trump. "We don't think (challenging) trade conditions between the European Union and the U.S., or accusations of government subsidy between Boeing and Airbus (EADSY) are likely to reemerge in a second Trump administration," he added.

Heico runs two business segments: Flight Support Group and Electronic Technologies Group.

It touts 13 straight quarters of growth in the larger Flight Support unit. It ties that to an improving commercial aviation market after the coronavirus pandemic. The company also says it has benefited from acquisitions over the past three years.

Warren Buffett Defense Play

In Q2, Warren Buffett led Berkshire picked up 1.04 million shares of Heico at around 165 per share, with a market value of over $185.37 million, WhaleWisdom data shows. Berkshire added more than 5,000 Heico shares in Q3 while slashing its top holding Apple (AAPL) by 25%, or 100 million shares.

Still, Heico only makes up less than 0.1% of Berkshire's total stock investment portfolio. Apple stock still dominates at a 26% portfolio weight, even after Berkshire Hathaway slashed its stake in the iPhone maker every quarter this year.

Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.

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