Technology in the construction industry keeps on changing. Just a few years ago additive manufacturing was only in our imaginations, and now we can print everything from auto parts to body parts. Erikson Air-Crane is a small market cap company at $250 million. This specialized company uses its heavy duty helicopters to do everything from fight fires from the sky to raising beams for skyscrapers and bridges. This specialty company just came public, and is serving a niche market in the construction industry that’s dominated by companies likeCaterpillar.
Going where no crane has gone before
Founded 40 years ago as part of the logging industry, Erickson evolved into a company that has over 100 heavy duty helicopters. These are very versatile choppers that can be fitted for extreme construction, or fighting wildfires in California. They have the capability to refill a 2,650 gallon water tank in 45 seconds (the equivalent of three fire engines) and can spray 300 gallons per minute at a range of 200 feet.
Brazil’s Petrobras just recently signed a two year contract with Erikson to service their offshore rigs. Offshore oil rigs are in constant need of supplies, and the best way to send them is via helicopter. Erikson’s South American exposure to the oil and natural gas fields will be a boon to both Erickson and oil companies. Petrobras, for example, will no longer have to wait for supplies by boat.
This year, Erickson completed a 3 year, 117 mile power line project that brings renewable solar energy into the city of San Diego. This was completed without the large environmental impact of bringing large cherry picker trucks through a forest to set up the lines. Erickson has long term contracts for over 65 helicopters year round, and is in the planning stages to build 15 more.
Erickson is completely vertically integrated. It designs and builds its helicopters in-house as a US company.
Erickson’s debt position is a little heavy, and it has recently entered into a new $100 million, five-year revolving credit facility. Erickson has over $400 million in debt that it used to construct more helicopters and propel earnings higher. Last year, the company had revenue growth of 33.8%.
This company has been able to defend its moat and secure margins of over 35%. Erickson will be able to maintain these margins, as they are able to better control their costs than anyone else looking to break into the helicopter construction business. As an investor, very little competition is something to celebrate.
The 3D printing space is dominated by the two largest players, Stratasys, Ltd. (NASDAQ:SSYS) and 3D Systems Corporation (NYSE:DDD). 3D Systems stands at $4.5 billion in market cap, while Stratasys is slightly smaller at $3.6 billion. Both of these giants in the industry are competing for corporate and consumer 3D printing market share, but their valuations are anything but two-dimensional.
These two players have been snatching up the smaller players and patent holders in the 3D Systems Corporation (NYSE:DDD) pace for the past few years to emerge as the largest stand-alone 3D printing companies. Both companies boast a gross operating margin near 20%, and are in a rapidly growing space.
Stratasys, Ltd. (NASDAQ:SSYS) and 3D Systems Corporation (NYSE:DDD) get a little tricky to compare against one another. Stratasys has been actively writing down its intangible assets, and this has led to some very large discrepancies in reconciling GAAP to Non-GAAP earnings. If investors were to ignore the Object acquisition write downs, the company would have earned nearly $1.50 instead of a $(0.58) loss per share in 2012. That kind of accounting and measurement makes me nervous as an investor.
The price to earnings multiple using Stratasys, Ltd. (NASDAQ:SSYS)’ non-GAAP earnings would yield a PE of 52, vs a PE of nearly 100 for competitor 3D Systems Corporation (NYSE:DDD). But due to the write down, it is very difficult to compare the PE’s of the two companies.