Erickson Now An Outperform At Imperial; Firm Says Opportunity Remains Despite Afghanistan, Iraq Drawdown

In a report published Friday, Imperial Capital analyst Bob McAdoo upgraded the rating on

from In-Line to Outperform, while raising the price target from $4 to $7, saying that liquidity pressures appear to be easing and the new management is presenting a "clear strategy" for a turnaround. Erickson has generated revenue of $339 million, adjusted EBITDA of $80 million and adjusted EPS of $0.12 in the 12-month period ended March 31, 2015. On that day, the company had $3 million in cash and cash equivalents and about $36 million available on its rollover. Erickson had long-term debt outstanding of $475 million. Erickson's shares have recently been under pressure due to tough economic conditions and investor concern regarding balance sheet liquidity. "Wish new management in place and upcoming seasonally stronger third quarter trends, we believe the ongoing concern risk at this time has been minimized," analyst Bob McAdoo said. Recent conversations with management indicate a clear strategy to move forward, which includes "targeting new and existing business lines in which Erickson is uniquely qualified as well as further developing the manufacturing and MRO business," McAdoo wrote. The company had recently indicated that its near-term performance could come under pressure due to "the significant drawdown of military activity" in Afghanistan and Iraq. "Going forward, the company looks to tap into an approximately $3.0bn market for special operations and state department work often referred to as grey market or black market work, for which it has historically had very modest participation," Imperial Capital noted in the report. Moreover, there could be additional opportunities in the manufacturing and maintenance of aircraft parts for older legacy helicopters used by the US as well as foreign governments.