Will Erickson Air-Crane (EAC) Stock Crash and Burn?
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Erickson Air-Crane (NASDAQ: EAC) is up an astonishing 49 percent since the beginning of the month. While the stock is clearly benefiting from its recent acquisition of Evergreen Helicopter, much of the upside comes as the stock has become somewhat of cult-momentum stock in certain trading circles. Buzz has become so loud on twitter, that the stock caught the attention of Mad Money host Jim Cramer. Last night, Cramer interviewed the CEO and called him and the company "the real deal."
While certainly an impressive run-up, and company for that matter, investors need to ask themselves if gains in the stock can be sustained.
Just today, analysts at Imperial Capital threw cold water on the stock's recent gain. After a ~240% increase since its April IPO, shares are now "basically trading consistent with its peers," analyst Ken Herbert said. "It reflects much of the current upside." Herbert initiated coverage on EAC with an In-Line rating and $30 price target.
Herbert also said the lack of catalysts, the focus on execution, potential for net selling, and slightly higher than average leverage will likely limit further multiple expansion.
The analyst notes as the company's heavy lift helicopter fleet has grown from 20 aircraft in 2012 to over 80 today, deployment and utilization risks have increased. In addition, the analyst believes the legacy Evergreen business will face significant headwinds due to its Afghanistan exposure in 2015. That said, the analyst sees opportunity for new business and synergies offsetting the potential weakness.
The firm sees 2013 and 2014 EPS of $2.05 and $2.30, respectively, slightly below the consensus.
In addition to the cautious analyst commentary, momentum traders need to ask themselves if last night's Mad Money appearance will mark a momentum top in the stock.
Shares of EAC are up 0.7 percent in pre-open trading to $28.24.
While certainly an impressive run-up, and company for that matter, investors need to ask themselves if gains in the stock can be sustained.
Just today, analysts at Imperial Capital threw cold water on the stock's recent gain. After a ~240% increase since its April IPO, shares are now "basically trading consistent with its peers," analyst Ken Herbert said. "It reflects much of the current upside." Herbert initiated coverage on EAC with an In-Line rating and $30 price target.
Herbert also said the lack of catalysts, the focus on execution, potential for net selling, and slightly higher than average leverage will likely limit further multiple expansion.
The analyst notes as the company's heavy lift helicopter fleet has grown from 20 aircraft in 2012 to over 80 today, deployment and utilization risks have increased. In addition, the analyst believes the legacy Evergreen business will face significant headwinds due to its Afghanistan exposure in 2015. That said, the analyst sees opportunity for new business and synergies offsetting the potential weakness.
The firm sees 2013 and 2014 EPS of $2.05 and $2.30, respectively, slightly below the consensus.
In addition to the cautious analyst commentary, momentum traders need to ask themselves if last night's Mad Money appearance will mark a momentum top in the stock.
Shares of EAC are up 0.7 percent in pre-open trading to $28.24.
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