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

By Beth McKenna – Nov 8, 2013 at 5:22PM

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This high-flying 2012 IPO, up 150% over the year, continues to give investors a turbulent ride.

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.

BA McKenna has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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