ERA Group Inc.: Zacks’ Bull of the Day Play

While the price of oil has been a hot topic of late, not much attention has been paid to support services for the oil and gas industry.  This segment has been under pressure as of late, but stringent cost cutting, and the addition of new contracts has one such service poised for a breakout in late 2015 and into 2016.  Due to these factors, Era Group Inc. (ERASnapshot Report) is the Zacks Bull of the Day.

This Zacks Ranked #1 (Strong Buy) company provides helicopter transportation services primarily to the oil and gas exploration, development, and production companies. The company’s helicopter services include emergency search and rescue services; air medical services; utility services, including support of firefighting, mining, power line, and pipeline survey services.

This Houston Texas based company recently had their grand opening of its 35-acre base in Houma, Louisiana which is considered the premier helicopter facility in the Gulf Coast area.  This massive base will contain more than 30 aircraft, and will be able to service about 15,000 passengers per month for Gulf Coast offshore oil and gas installations.  This new capacity will come in handy when later this year (and through 2016) their new contracts in the Gulf of Mexico, and Petrobras in Brazil take effect.

Moreover, according to Chris Bradshaw, President, CFO, and CEO, “We are also pleased to announce entry into the Colombian market via the acquisition of Sicher Helicopters SAS. While Colombia has historically been an onshore oil and gas market, the acquisition of Sicher’s air operator certificate and existing operations should allow us to capitalize on the growing demand for new generation helicopters, operated with the highest safety standards, to support the international oil and gas companies who are exploring and developing Colombia’s promising offshore blocks.”

To facilitate this new capacity, the company took on some added expenses via, S92 heavy helicopters, Sicher Helicopters SAS, and base expansion for the Houma Louisiana project.  Yet, these new expenses were taken on in order to better position itself for future growth.  While the company secured two new contracts, the company has placed several other bids to place their excess helicopters under future contracts.  The combination of existing contracts and the potential for further contracts has increased the potential value of the company for the next few quarters.

Increasing Estimates

As you can see in the Price and Consensus graph below, expectations for this company have significantly improved for 2015 and 2016.

Due to the positive steps management is taking to ensure future growth, estimates over the past 7 days has increased for Q3 15, FY 15 and FY 16;  Q3 15 rose from $0.18 to $0.22, FY 15 improved from $0.61 to $0.66, and FY 16 jumped from $0.85 to $0.95.

Bottom Line

While the oil and gas industry is under pressure, people still need to get out to the rigs, and home from the rigs.  Further, with the increased attention paid to base expansion and contract gains, Era Group is positioning itself as the premier support service company to the oil and gas industry for 2015 and beyond.

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