Jim Cramer Likes HEICO (HEI) but Warns About Aerospace and Boeing (BA)

During the lightning round of the September 29 episode of Mad Money, a caller sought Jim Cramer's opinion of HEICO Corporation (NYSE: HEI ), and he replied:

Well, I like HEICO, but do I ever hate the aerospace sector? I mean, I am suffering with Boeing for my Charitable Trust. I don't want to put anybody anywhere near anything aerospace right now. We have to have oil down.

HEICO and The Boeing Company (NYSE: BA ) operate in different parts of the aerospace industry. HEICO supplies aircraft replacement parts, repair and overhaul services, and specialty aerospace products, giving it significant exposure to the aftermarket. Boeing manufactures commercial aircraft and defense platforms, making production rates, deliveries and certification much more important to its financial performance. It is worth noting that on September 11, Cramer said that "Boeing is ready to go up." You can read more here .

HEICO Corporation's (NYSE:HEI) fiscal third-quarter results provide a sharp contrast with Boeing's recent financial performance. Revenue rose 23% year over year to a record $1.41 billion, while net income increased 33% to $235.4 million, or $1.67 per diluted share. Organic net sales increased 14%. The Flight Support Group generated $947.8 million in revenue, up 18%, while operating income increased 24%. HEICO also completed a $1.2 billion senior-notes offering in July, consisting of $550 million of 4.950% notes due 2031 and $650 million of 5.400% notes due 2036. The company said it used the net proceeds to repay borrowings under its revolving credit facility.

The financing therefore changed the composition and maturity of HEICO's debt rather than simply adding $1.2 billion to its borrowing needs. The more relevant concern for investors is whether HEICO can continue generating enough earnings and cash flow to support its acquisition-driven growth while carrying the new long-term notes.

Boeing Still Faces Production and Certification Problems

The Boeing Company (NYSE:BA) reported second-quarter revenue of $24.6 billion, up 8% year over year, but recorded a $428 million net loss. Commercial Airplanes generated $11.8 billion of revenue and reported a negative 2.7% operating margin. In September, CEO Kelly Ortberg said stabilizing 737 MAX production at 47 aircraft per month was taking longer than expected because Boeing's own 737 wing-production operation was not achieving the flow improvements needed to support the higher rate. The company is also working to increase 787 production to 10 aircraft per month.