Erickson Air Crane Inc. signed a Master Agreement with Sikorsky Aircraft Corp., a unit of United Technologies Corp. (UTX - Analyst Report) , for manufacturing fabricated aircraft assemblies. The contract is priced over $5.6 million.
The majority of revenues will be received by Erickson Air Crane once delivery commences in 2014 running through 2015. Work on the contract, which includes engineering, legacy aircraft production, and fabrication of aircraft assemblies, will be initiated by Erickson Air Crane right away.
Erickson Air Crane with a market capitalization of $144.7 million is focused on both improving and diversifying its technological expertise. Recent efforts include the upgrading of Erickson Air Crane’s avionics intelligence in its S-64 Aircrane Helitanker by incorporating Blue Sky Network’s satellite tracking systems. This would enhance the Helitanker’s firefighting capabilities.
The company’s technological prowess is expected to open up multiple avenues for growth. This would help the company to counter the headwinds in the defense sector. Erickson Air Crane secured a five-year contract to offer comprehensive replenishment and logistics services to Military Sealift Command.
The sequestration effect is nevertheless projected to cut defense spending by $52 billion in fiscal 2014, particularly in areas of defense R&D. Given the harsh budget environment, Erickson Air Crane is likely to tread cautiously despite its best efforts.
Erickson Air Crane’s strategic acquisitions of Air Amazonia Serviços Aeronauticos Ltda. and Evergreen Helicopters will allow the company to consolidate its position in the industry. The acquisition strategy will help offset the company’s low-priced defense contract wins.
The company also sees limited competition in rendering helicopter services. Erickson Air currently holds a Zacks Rank #3 (Hold).
Other better-placed defense players at the moment are Zacks Ranked #2 (Buy) Northrop Grumman Corp. (NOC - Analyst Report) and Raytheon Co. (RTN - Analyst Report) .