01:50 PM EDT, 05/23/2024 (MT Newswires) -- Heico's ( HEI ) recent stock strength reflects an improving outlook for margins in the company's electronic technologies group and continued upside potential in the flight support group's growth and margins, RBC Capital Markets said in a note emailed Thursday.

These are expected to provide positive catalysts for the stock, which has continued to lag its peers in the aerospace industry, the note said.

RBC said it estimates a 7% growth for the ETG segment in fiscal Q2, above the consensus of 5.6%, as improving defense outlays could lead to strong defense sales growth for the company. The firm is looking at an ETG margin of 22.5% compared with consensus of 22.1%.

"While the ETG segment faces potential headwinds from its non-defense portfolio, we like the opportunity for stronger ETG segment sales in the quarter, which would be a positive for margins," RBC said, adding a Q2 beat on the ETG margins would be a strong catalyst for the stock.

RBC also estimates a 15% organic growth and 21.3% margins for the FSG segment in Q2 as demand for aftermarket parts remains strong and the pricing environment continues to be favorable.

Heico ( HEI ) is scheduled to report its fiscal Q2 earnings Tuesday.

RBC maintained its outperform rating on the stock while raising its price target to $235 from $225.

Price: 218.94, Change: +3.21, Percent Change: +1.49