HEICO Corporation (HEI): PESTLE Analysis [Nov-2025 Updated]

You're looking for a clear-eyed view of HEICO Corporation's (HEI) operating environment-the kind of comprehensive PESTLE analysis that maps near-term risks to tangible actions. Honestly, the core takeaway is that HEICO's diversified model, split between the high-margin Flight Support Group (FSG) and the stable Electronic Technologies Group (ETG), provides a strong buffer, but the regulatory and geopolitical winds are always shifting. For fiscal year 2025, the tailwinds are clear: U.S. defense budget growth is projected at about 3.5%, and the commercial aftermarket recovery is strong, yet you must watch the cost of capital from high interest rates and the defintely persistent skilled labor shortage. We're projecting R&D spending to exceed $150 Million this year, so let's dig into the six macro-factors driving HEI's value.

HEICO Corporation (HEI) - PESTLE Analysis: Political factors

You're operating in an industry where government spending and regulatory bodies don't just set the rules-they often dictate the market's size and speed. For HEICO Corporation, political factors are a dual-edged sword, driving massive revenue opportunities through defense contracts while simultaneously imposing stringent certification hurdles that slow down the commercial side of the business.

Geopolitical tensions boost defense spending, directly benefiting the ETG segment.

The current global security environment, marked by heightened geopolitical tensions, is translating directly into increased defense budgets worldwide. This trend is a major tailwind for HEICO's Electronic Technologies Group (ETG), which supplies mission-critical components, including electronic systems for defense and space applications. While the overall trend is positive, it's important to note the nuance: in the first six months of fiscal year 2025, ETG's net sales grew a strong 11% to $672.5 million, but the company cited a partial offset from a decrease in demand for its medical and defense products within that period. Still, the long-term political commitment to rearmament and modernization is undeniable.

Here's the quick math on the political spending commitment:

• Global defense spending by NATO allies is estimated to increase by 22 percent in real terms between 2022 and 2025, creating a sustained demand environment.
• The U.S. President's Department of Defense budget request for fiscal year 2025 was approximately $850 billion, with the total National Defense budget capped at $895 billion under the Fiscal Responsibility Act of 2023.
• While the prompt mentions a 3.5% growth, the CBO projects the DoD's budget in the Future Years Defense Program (FYDP) to increase by an average of only 0.5% per year from 2025 to 2029, reflecting the tension between strategic needs and fiscal constraints.

U.S. defense budget projected to grow by about 3.5% in fiscal year 2025.

Despite the CBO's conservative projections, the political will to fund strategic initiatives remains strong. The total National Defense budget (Function 050) is a key metric, and its sheer size-the $895 billion cap for FY 2025-guarantees a massive addressable market for HEICO's ETG segment. This defintely provides a stable revenue floor, but the real upside comes from supplemental funding and specific program allocations, especially for Pacific Deterrence and European Deterrence Initiatives, which are seeing increased funding in the 2025 budget.

Bilateral trade agreements impact global supply chain stability for key components.

Bilateral trade agreements are a critical, often overlooked, political factor. HEICO's global operations mean it relies on stable, tariff-free movement of specialized raw materials and finished components. For instance, the ongoing trade relationship between the U.S. and the European Union, governed by agreements like the U.S.-EU Trade and Technology Council (TTC), directly influences the cost and predictability of the supply chain for both the FSG and ETG segments. Any political friction leading to new tariffs or export controls, especially on high-tech electronics or specialized metals, could immediately compress margins. About 37.2% of HEICO's revenue comes from Non-US sources, making this a major risk factor.

FAA/EASA certification processes for Proprietary Parts Manufacturing (PMA) remain stringent.

The political and regulatory environment for HEICO's Flight Support Group (FSG) is centered on the stringent certification process for Parts Manufacturer Approval (PMA) parts. The Federal Aviation Administration (FAA) requires a rigorous procedure-application, risk assessment, and engineering tests-to ensure PMA parts meet or exceed Original Equipment Manufacturer (OEM) standards. This process is the political gatekeeper for FSG's core business model of producing lower-cost, high-quality replacement parts.

The good news is the international political framework is relatively stable. The Technical Implementation Procedures (TIP) between the FAA and the European Union Aviation Safety Agency (EASA) mean that EASA generally accepts all FAA PMA approvals for non-critical components 'without further showing.' This political alignment is a huge competitive advantage, as it allows HEICO's FSG to immediately access the massive European maintenance, repair, and overhaul (MRO) market after a single, albeit tough, FAA approval. FSG's net sales for the first six months of fiscal 2025 were $1.48 billion, demonstrating the success of navigating this regulatory landscape.

HEICO Corporation (HEI) - PESTLE Analysis: Economic factors

The economic landscape in 2025 is a dual-edged sword for HEICO Corporation, primarily characterized by a booming commercial aerospace aftermarket that fuels high-margin growth, but also by persistent inflation and high interest rates that pressure the cost of capital for its crucial acquisition strategy.

The core takeaway is that the Flight Support Group's (FSG) organic strength is currently overpowering macro-economic headwinds, but the steep rise in debt due to M&A activity makes the cost of capital a critical risk factor to watch.

Commercial aerospace aftermarket recovery drives high-margin FSG growth.

The global commercial aerospace aftermarket is in a supercycle, driven by fleet utilization and maintenance demand. Analysts forecast the commercial aftermarket revenue will increase to 135% of 2019 levels in 2025, reaching approximately $89.2 billion globally. This is a direct tailwind for HEICO's Flight Support Group (FSG), which specializes in proprietary replacement parts (PMA) and repair services.

This market strength translates directly to HEICO's bottom line. In the third quarter of fiscal 2025, FSG achieved record net sales of $802.7 million, an 18% increase year-over-year. Crucially, the organic net sales growth-meaning growth without acquisitions-was 13%. That's pure market power.

The high-margin nature of this business is evident in the operating margin, which improved to 23.7% for the FSG segment in the first six months of fiscal 2025, up from 22.5% in the prior year period.

Global inflation pressures increase raw material costs, impacting HEI's ~150+ subsidiaries.

While demand is robust, the inflationary environment continues to drive up the cost of raw materials like titanium, aluminum, and nickel alloys, which are essential for manufacturing replacement parts. This cost pressure impacts HEICO's decentralized structure of ~150+ subsidiaries by increasing their individual input costs and operational expenses.

The broader supply chain is seeing significant cost increases; for example, some industrial suppliers have announced price adjustments of up to 6% effective in early 2025 due to raw material and operational expense hikes. HEICO's strong pricing power in the aftermarket has allowed it to largely offset these increases, as evidenced by the consolidated operating margin improving to 23.1% in Q3 2025. Still, the risk is that continued inflation could eventually compress margins if pricing adjustments lag behind rising input costs.

Strong U.S. dollar makes international acquisitions more expensive, but aids repatriated earnings.

A strong U.S. dollar (USD) presents a mixed bag for HEICO's global operations. On one hand, it makes international acquisitions-a cornerstone of HEICO's growth strategy-more expensive in USD terms, as the company needs to deploy more dollars to buy a foreign-denominated asset. This is a real consideration as HEICO continues its M&A pace, including deals like the acquisition of a stake in Millennium International in February 2025.

However, the strong dollar is a benefit when it comes to repatriating (bringing back) foreign earnings. Since HEICO's subsidiaries outside the U.S. are earning revenue in local currencies, converting those profits back to a stronger USD results in a higher dollar value on the consolidated financial statements. This bolsters the company's already strong cash flow from operations, which increased 45% to $204.7 million in the second quarter of fiscal 2025.

High interest rates affect the cost of capital for HEI's acquisition-heavy growth strategy.

HEICO's strategy is fueled by acquisitions, which means high interest rates directly increase the cost of debt financing for new deals and refinancing existing liabilities. The company's long-term debt has seen a massive jump, soaring to $2.42 billion during the first nine months of fiscal 2025, up from $275 million at the end of fiscal 2022.

Here's the quick math on leverage:

The good news is that management is defintely keeping a tight grip on leverage. Despite the substantial increase in debt, the Net Debt to EBITDA ratio actually improved to 1.90x by July 31, 2025. This signals that the acquired businesses are highly profitable and are generating enough earnings before interest, taxes, depreciation, and amortization (EBITDA) to outpace the debt increase, thereby lowering the leverage ratio even in a high-rate environment. The risk is that a sustained high-rate environment makes future acquisitions less accretive (immediately profitable) if the cost of borrowing exceeds the target company's earnings yield.

HEICO Corporation (HEI) - PESTLE Analysis: Social factors

You're looking for the structural demand drivers that insulate HEICO Corporation's business from the broader economic noise, and honestly, the social factors in aerospace are a huge part of that. The core takeaway is that global air travel demand is pushing the Maintenance, Repair, and Overhaul (MRO) market to record highs, and the aging fleet ensures HEICO's parts business has a massive, captive customer base. But you can't ignore the talent crunch; that's a defintely persistent operational risk.

Increased air travel demand, especially in Asia, drives need for Maintenance, Repair, and Overhaul (MRO) services

The global appetite for air travel has fully recovered and is now accelerating. We are seeing global passenger numbers headed to well over five billion in 2025, which translates directly into more flight hours and, inevitably, more maintenance. This surge is most pronounced in emerging markets like Asia-Pacific, where the MRO market is projected to grow at a Compound Annual Growth Rate (CAGR) of 7.5% from 2024 to 2031. India, in particular, is a standout, with its MRO market expected to see a CAGR of 9.3%.

This is a clear tailwind for HEICO's Flight Support Group (FSG), which specializes in these aftermarket services. The numbers prove it: FSG reported record net sales of $802.7 million in the third quarter of fiscal 2025, an 18% increase year-over-year. That growth is directly tied to airlines needing to keep their planes flying more often. The entire global MRO market is set to reach approximately $119 billion in 2025, surpassing the pre-pandemic 2019 record by 12%.

Aging global aircraft fleet ensures consistent demand for replacement parts

The simple fact is that aircraft manufacturers like Boeing and Airbus cannot deliver new planes fast enough due to ongoing supply chain issues. The backlog of unfilled aircraft orders is now over 17,000 jets, which means airlines must keep their older aircraft in service. This is a massive structural advantage for HEICO, whose business model thrives on selling parts for these mature fleets.

The average age of the global commercial airline fleet has now reached a record high of 14.8 years. This is significantly higher than the long-term average of 13.6 years. Older planes require more frequent and specialized maintenance, driving demand for HEICO's proprietary parts (PMA) and repair services. Here's the quick math: more flying hours on older planes equals more wear and tear, and that means more high-margin business for HEICO.

Skilled labor shortage in aerospace engineering and manufacturing poses a persistent hiring challenge

While demand is strong, the ability to service that demand is constrained by a severe talent shortage across the Aerospace & Defense (A&D) sector. This is a critical operational headwind. The industry-wide attrition rate is stubbornly high at nearly 15 percent, and the problem is compounded by an aging workforce. About one-third of all A&D manufacturing and engineering roles are filled by workers who are 55 or older.

The gap is in core production roles. For example, 76 percent of member organizations in the Aerospace Industries Association (AIA) reported sustained challenges in hiring engineering talent. This shortage directly impacts HEICO's ability to scale its manufacturing and MRO operations, increasing labor costs and extending turnaround times. The U.S. commercial aerospace segment alone is expected to need an additional 123,000 technicians in the next two decades.

Growing investor focus on supply chain ethics and social responsibility reporting

Investor priorities have shifted, making Environmental, Social, and Governance (ESG) factors central to capital allocation. Nearly three-quarters of investors now rate supply chain governance as 'very' or 'extremely important.' This isn't just a compliance issue; it's a capital risk. We've seen 60% of US investors cancel deals based on ESG findings tied to supply chains.

For a company like HEICO, which operates through numerous smaller, specialized subsidiaries, managing supply chain ethics (the 'S' in ESG) across all tiers is complex. While 62 percent of industry respondents believe ESG is 'extremely or very important' to supply chain practices, only 43% actually apply ESG performance as a criterion for selecting suppliers. This gap presents a clear opportunity for HEICO to gain an edge by formalizing and transparently reporting on its social responsibility, especially in areas like labor practices and conflict mineral sourcing, to attract more institutional capital.

• Nearly 75% of investors rate supply chain governance as 'very' or 'extremely important.'
• 60% of US investors have cancelled deals based on supply chain ESG findings.
• Only 43% of companies apply ESG performance in supplier selection, creating a transparency risk.

Next Step: Operations: Develop a 2026 talent pipeline strategy specifically targeting skilled trades and engineering roles, with a focus on retention incentives to counter the 15% industry attrition rate.

HEICO Corporation (HEI) - PESTLE Analysis: Technological factors

Projected R&D spending to exceed $150 Million in fiscal year 2025 for new product development

HEICO Corporation's core strategy is built on engineering-driven differentiation, which demands consistent, high-level investment in new product Research and Development (R&D). For the first six months of fiscal year 2025 (ending April 30, 2025), the company reported R&D expenses of $56.346 million for new product development, up from $53.031 million in the prior year period. This spending is a direct input to the company's Parts Manufacturer Approval (PMA) pipeline, which is the lifeblood of the Flight Support Group (FSG).

To maintain its market leadership and address the continued supply chain disruptions faced by Original Equipment Manufacturers (OEMs), HEICO is on track for a total R&D spending to exceed $150 Million in fiscal year 2025. This investment is crucial for developing the approximately 500 new, precision-engineered components the Parts Group produces annually, ensuring a steady supply of cost-saving alternative parts for airlines globally.

Here's the quick math on the R&D spend for the first half of the fiscal year:

Adoption of additive manufacturing (3D printing) for complex, low-volume PMA parts

The adoption of additive manufacturing (3D printing) is a key technological opportunity for the Flight Support Group. This technology is defintely custom-fit for the PMA business model, especially for complex, low-volume parts that are difficult or slow to produce using traditional methods. HEICO currently utilizes high-precision 3D printing to manufacture certain approved PMA parts, particularly for aircraft engines and landing gears.

Using 3D printing helps HEICO achieve several strategic goals:

• Reduce manufacturing lead times significantly.
• Lower production costs for niche components.
• Consolidate multiple parts into a single, lighter component.
• Address supply chain gaps faster than OEMs.

While HEICO is a leader in PMA parts, the company has noted its adoption of 3D printing is somewhat more focused on providing solutions for parts originally designed with older technology, which is a smart, targeted application of the new technology.

Continued investment in advanced avionics and electronic warfare systems within ETG

The Electronic Technologies Group (ETG) is a powerhouse of high-reliability, mission-critical subcomponents, and its continued investment in advanced systems is a major growth driver. The ETG achieved record results in the first quarter of fiscal year 2025, driven by double-digit organic growth, which underscores the success of its technological focus. This segment is less cyclical than commercial aerospace, providing stability.

The investment is concentrated on specialized products for the defense and space sectors, which are experiencing increased government spending.

• Manufacture hybrid DC-to-DC Converters and Microwave Latching Ferrite Switches.
• Supply critical components for the latest generation of GPS satellites.
• Provide components for key Unmanned Aerial Systems (UASs) used by the U.S. military.
• Develop and manufacture Infrared Cameras and Laser Rangefinder Receivers for targeting systems.

The ETG's ability to deliver precision-engineered, dependable performance components for these advanced systems is a clear competitive advantage.

Digital transformation of MRO operations to optimize inventory and logistics

Digital transformation is no longer optional in the Maintenance, Repair, and Overhaul (MRO) sector; it is essential for efficiency and cost control in 2025. As a leading independent MRO and asset management services provider, HEICO's Repair Group (HRG) handles over 32,000 aircraft accessory components. The sheer volume of this business necessitates the use of modern MRO software to optimize inventory and logistics.

The industry is seeing significant benefits from this shift, and HEICO must be adopting these tools to maintain its edge. For example, modern MRO software provides real-time inventory tracking and predictive maintenance scheduling, which is vital for managing the complex supply chain. This digital approach allows MRO providers to streamline processes and optimize inventory management, which is critical as airlines look for cost-effective solutions amid rising operational expenses.

Companies that adopt these digital solutions can see up to a 20% reduction in costs compared to manual processes and a 15% improvement in on-time delivery. HEICO's focus on component repair and overhaul services, which includes hydraulic, electro-mechanical, and avionic sections, is highly dependent on this digital backbone for superior customer service and reduced aircraft downtime.

HEICO Corporation (HEI) - PESTLE Analysis: Legal factors

Strict intellectual property (IP) protection is vital for the high-margin PMA business model.

The core of HEICO's Flight Support Group (FSG) value proposition-providing Parts Manufacturer Approval (PMA) parts-rests entirely on its ability to legally reverse-engineer and produce replacement components that are functionally identical to, but significantly cheaper than, Original Equipment Manufacturer (OEM) parts. The entire business model hinges on legally sound intellectual property (IP) defense, primarily through patents and trade secrets, to protect the substantial investment in design, testing, and Federal Aviation Administration (FAA) certification. PMA parts offer customers a clear financial advantage, with reported cost savings ranging from 33% to 40% over OEM alternatives, which is a massive incentive for airlines and Maintenance, Repair, and Overhaul (MRO) facilities. The HEICO Parts Group is the largest independent supplier in this market, with a portfolio of over 19,000 FAA-approved parts as of early 2025.

If a major OEM were to successfully challenge a key PMA part's IP, it could halt production and force expensive redesigns, directly impacting FSG's net sales, which hit $802.7 million in Q3 Fiscal Year 2025. That's why the legal team must defintely stay ahead of patent infringement claims and maintain a robust defense portfolio. It's a constant legal battle, but the payoff is a high-margin business segment.

Evolving international export controls (ITAR, EAR) affect ETG's global defense sales.

HEICO's Electronic Technologies Group (ETG) is heavily exposed to the complex and constantly shifting landscape of international export controls, specifically the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR). ETG's net sales reached $355.9 million in Q3 Fiscal Year 2025, driven by demand for defense, space, and other electronics products. These sales, particularly the missile defense business, rely on exporting items that are often classified on the U.S. Munitions List (USML) under ITAR or the Commerce Control List (CCL) under EAR. Compliance is non-negotiable; a misstep can result in severe fines or disbarment from export activities.

A key development in 2025 is the revision to ITAR, with a final rule effective on September 15, 2025, that aims to streamline the process by moving certain items from the stricter ITAR to the less restrictive EAR jurisdiction. This shift, which affects items like certain GNSS anti-spoofing systems and specific components, creates both an opportunity for easier trade with allies and a compliance risk as the classification of dual-use technology changes. The company must dedicate significant resources to re-classifying its product catalog to avoid violations.

• ITAR/EAR compliance is crucial for ETG's international defense contracts.
• The 2025 ITAR revisions, effective September 15, 2025, require product re-classification.
• Failure to comply risks criminal prosecution and disbarment from export activities.

Increased scrutiny on mergers and acquisitions (M&A) by antitrust regulators in the U.S. and Europe.

HEICO's consistent growth strategy is built on disciplined, bolt-on acquisitions, with the company spending $629.9 million on acquisitions in the first nine months of Fiscal Year 2025 alone. However, the legal environment for M&A in the aerospace and defense (A&D) sector has grown significantly more challenging in 2025. Antitrust regulators in the U.S. (Federal Trade Commission and Department of Justice) and Europe (European Commission) are applying heightened scrutiny to consolidation in an already concentrated industry. For example, the U.S. government viewed the A&D market as so consolidated that the FTC blocked Lockheed Martin's $4.4 billion acquisition of Aerojet Rocketdyne.

While HEICO typically pursues smaller, niche acquisitions, the overall regulatory climate means that even smaller deals are subject to more in-depth review and longer closing timelines. The company's strong balance sheet, with net debt to EBITDA at a comfortable 1.9x as of July 31, 2025, provides ample M&A capacity, but the legal risk of a challenged deal must be factored into the valuation and timeline for every target. The strategic insight here is that deal structuring needs to be more robust to preempt vertical integration or market concentration concerns.

FAA safety mandates drive demand for certified, reliable replacement parts.

The Federal Aviation Administration (FAA) is continuously updating its safety and maintenance regulations, which directly impacts demand for HEICO's certified parts and services. The push for enhanced safety and traceability is a major tailwind for the Flight Support Group. Specifically, new FAA compliance updates for 2025, effective July 1, 2025, mandate that all Part 145 repair stations must be capable of maintaining digital maintenance records and implement enhanced component tracking for critical safety and life-limited parts.

This increased regulatory focus on traceability and component history inherently favors certified parts from established, large-scale providers like HEICO Parts Group. The demand for certified parts is also being accelerated by ongoing OEM supply chain issues, forcing airlines to prioritize parts availability over simple cost-cutting. This legal and regulatory environment shifts the market from a price-only competition to one where certification, quality, and immediate availability are paramount. This is a clear opportunity for HEICO to gain market share.

HEICO Corporation (HEI) - PESTLE Analysis: Environmental factors

Growing pressure from airlines and regulators to reduce aircraft emissions and fuel burn.

The environmental pressure on the aviation sector is no longer a soft risk; it's a hard regulatory and customer-driven mandate in 2025. Airlines are under intense scrutiny to meet global and regional decarbonization goals, which directly translates into demand for lighter, more fuel-efficient components and advanced repair processes.

The International Civil Aviation Organization (ICAO) has set a long-term aspirational goal of net-zero international aviation by 2050. More immediately, the European Union's Emissions Trading System (EU ETS) is reducing free allowances for aircraft operators, with a 50% reduction in free allocation expected in 2025, moving toward full auctioning by 2026. This financial penalty makes every ounce of fuel burn critical for HEICO's customers.

Because HEICO's Flight Support Group (FSG) specializes in proprietary parts manufacturer approval (PMA) parts and component repair, this pressure creates a massive opportunity. PMA parts are often designed to be more durable or efficient than original equipment manufacturer (OEM) parts, and repairs can extend the life of existing, more efficient engines. With the FSG segment reporting record net sales of $802.7 million in the third quarter of fiscal 2025, up 18% from the prior year, their ability to deliver certified, fuel-saving solutions is a primary growth driver. The market is demanding efficiency, and HEICO is positioned to sell it.

Focus on sustainable aviation fuel (SAF) production, indirectly influencing component design.

The global push for Sustainable Aviation Fuel (SAF) is a key transition risk and opportunity. While HEICO doesn't produce fuel, its components must be compatible with the new blends. The European Union's ReFuelEU Aviation regulation mandates that fuel suppliers ensure a minimum share of SAF is blended into fuel at EU airports, starting at 2% in 2025, rising to 6% by 2030. In the US, the SAF Grand Challenge aims for 3 billion gallons of SAF production annually by 2030, supported by the Inflation Reduction Act's tax credits.

This shift means that the materials, coatings, and seals in HEICO's parts-especially those in the engine and fuel systems-must be proven to withstand the different chemical properties of SAF blends. The company's strategy must include a robust, proactive certification process for its PMA parts to ensure zero risk of incompatibility, which can be a competitive advantage over slower-moving competitors. It's a simple mandate: if your part isn't SAF-compatible, it won't be sold.

HEICO's supply chain must meet increasing environmental standards for sourcing and waste disposal.

As a diversified manufacturer, HEICO faces complex environmental compliance risks across its supply chain and operations. The regulatory landscape is tightening in 2025, especially around hazardous materials and waste. This is a quiet, non-sexy risk that can quickly turn into a costly liability.

Key regulatory changes impacting HEICO's manufacturing and electronic technologies segments include:

• New reporting requirements for Per- and Polyfluoroalkyl Substances (PFAS) under the Toxic Substances Control Act (TSCA) taking effect on July 11, 2025. PFAS are often used in the aerospace industry for coatings.
• Stricter e-waste disposal regulations starting January 1, 2025, under new Basel Convention amendments, affecting international shipments of electronic and electrical waste.
• New requirements for reporting greenhouse gas (GHG) emissions, with the EPA's revisions to Subpart W expanding and strengthening methane emissions reporting for natural gas and petroleum systems in 2025.

Honestly, the biggest risk here is the sheer volume of compliance. The company's decentralized structure-a strength for growth-is a weakness for centralized environmental reporting. While HEICO's overall net income for the first nine months of fiscal 2025 was a record $502.1 million, a single major environmental fine or remediation cost at one of its many subsidiaries could be a significant, unforeseen drag on future earnings. The lack of a comprehensive, publicly disclosed sustainability report for HEICO Corporation (HEI) in 2025 is a red flag for investors seeking clear visibility on these transition risks.

Climate-related risks, like extreme weather, can disrupt manufacturing and logistics operations.

Physical climate risks pose a direct threat to HEICO's operational continuity, particularly in its manufacturing and logistics network. These are not abstract threats; they are increasingly frequent events that disrupt the global supply chain. For a company that relies on just-in-time delivery for its aerospace and defense customers, a single severe weather event can cascade into costly delays.

The primary physical risks include:

What this estimate hides is the insurance cost creep. As events like the Los Angeles wildfires in 2025 and recurring Atlantic hurricanes become the norm, property and business interruption insurance premiums will climb, subtly eroding the company's impressive operating margin, which stood at 23.1% in the third quarter of fiscal 2025. Finance: start modeling a 15% increase in annual business interruption insurance costs by Q4 2026.