Erickson

EAC : NYSE : US$13.80
HOLD 
Target: US$17.00

COMPANY DESCRIPTION:
Erickson Air-Crane is a provider of heavy and medium-lift
air services for government and commercial customers.
Key markets include firefighting, personnel transport,
construction, and oil and gas. The company is the largest
operator, and type certificate holder, of the SH-64
Aircrane. The company is based in Portland, Oregon.

Transportation and Industrials — Aerospace and Defense
STRONG Q3/14 OVERSHADOWED BY SOFTER FULL YEAR OUTLOOK
Investment recommendation
EAC reported adjusted Q3/14 EPS of $1.22, compared to our estimate of
$0.95 and consensus of $1.01. Cash flow in the quarter was a positive
~$17M. Note that Q3 is usually seasonally the strongest quarter for EAC.
However, the company indicated that full year results would likely be at
the lower end of its guidance range, which was unchanged from prior
quarters. In the Government segment, firefighting revenues were up
12% over Q3/13, while Defense & Security revenues were down 25%
year-over-year. Much of the growth was in Infrastructure (oil and gas)
markets. We continue to see risk associated with the timing of the
commercial market ramp, while revenues in the defense segment
seemed to be declining slighter faster than we had modeled. We are
maintaining our HOLD rating and lowering our price target to $17.
Investment highlights
 The company saw a nice step-up in bill rates across markets.
However, the company indicated that Q4/14 results will drive full
year results at the lower end of the guidance range. We are
maintaining our full-year 2014 $0.46 EPS estimate.
 While there was good cash flow in the quarter, the outlook for 2015
is still about the ramp down in Government revenues, and how fast
they can be replaced by commercial revenues, specifically in oil and
gas. The company did announce a win in Ecuador, which should be
positive for 2015.
Valuation
We are lowering our price target to $17. Our price target is based on the
average of a 12.0x EPS multiple and a 5.25x EBITDA multiple applied to
our 2015 estimates

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