Why Highflier Erickson Air-Crane's Shares Crashed 9%

Erickson Air-Crane's (NASDAQ: EAC  ) shares closed down nearly 9% when the market retired for the day to close out the trading week at $17.22. This highflier, which went public in April 2012 at $8 per share, has soared 150% over the one-year period.

Shares of the manufacturer and operator of the heavy-lift helicopter, the Erickson S-64 Aircrane, plummeted 22% earlier in the day, after the company announced disappointing third-quarter earnings after the market close yesterday. Here are the highlights: 

  • Revenue increased 58% to $120.2 million; however, this was due to acquisitions, as organic growth was down, due to lower firefighting revenue and a decrease in cost per hour and services in Italy. 
  • Adjusted operating income (which excludes acquisition expenses) increased 17.4% to $35.8 million. 
  • Adjusted earnings per share dropped considerably to $1.16, down from $1.80. This was largely due to an increase in net interest expense – $8.7 million versus the prior period's $1.5 million – associated with the company's increased borrowings to fund acquisitions. 
  • Full-year pro forma guidance was lowered to incorporate the lower than expected third-quarter results and current soft outlook for the fourth quarter. 

Extreme turbulence is par for the course with this stock, given short interest is a sky-high 41% of float. The stock has both risen and dropped more than 7% a day several times over the year. Investors should fasten their seat belts and expect more of the same in this potentially high-reward, yet also high-risk stock.

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