On May 14, Zacks Investment Research upgraded Erickson Air-Crane Inc. (EAC) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Erickson Air-Crane has been witnessing rising earnings estimates, thanks to its strong first quarter 2013 results. Moreover, this high lift aircraft manufacturer registered positive earnings surprises in 3 of the last 4 quarters. The long-term expected earnings growth rate for this stock is 5.5%.
Erickson Air-Crane posted first quarter 2013 adjusted earnings of 1 cent per share, ahead of the Zacks Consensus Estimate of a loss of 13 cents. The quarterly revenue of $36.9 million climbed 33.8% year over year. The figure also surpassed the Zacks Consensus Estimate of $33.0 million.
On May 2, the company completed the acquisition of Evergreen Helicopters, Inc. from Evergreen International Aviation, Inc. This acquisition will help Erickson Air-Crane to expand its markets and be immediately accretive to its earnings. In addition, the company’s proposed Air Amazonia acquisition will expand its reach in the developing South American oil and gas markets.
The present valuation also makes the shares of Erickson Air-Crane attractive. Shares of the company currently trade at 12.03x 12-month forward earnings, a 13.4% discount to the peer group average of 13.89x. Erickson Air-Crane’s ROE of 17.1 is higher than its peer group average of 10.5, indicating better return from investments than its peers.
The Zacks Consensus Estimate for 2013 leaped 46.58% to $2.29 per share as all the estimates were revised higher over the last 30 days. All estimates moved north for 2014 as well over the past one month, lifting the Zacks Consensus Estimate by 7.14% to $2.45 per share.
Other Stocks to Consider
Besides Erickson Air-Crane other defense operators worth accumulating are Wesco Aircraft Holdings, Inc. (WAIR), Northrop Grumman Corporation (NOC) and Alliant Techsystems Inc. (ATK). All these companies presently carry a Zacks Rank #2 (Buy).
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