Wildfire Policy Shifts And Expanded Federal Funding Will Drive Long Term Earnings Power

Catalysts

About Bridger Aerospace Group Holdings

Bridger Aerospace Group Holdings provides specialized aerial wildfire suppression, surveillance and data services to government and defense customers.

What are the underlying business or industry changes driving this perspective?

• Acceleration of federal initiatives to overhaul the national wildfire response framework, including the Wildland Fire Service Plan, the Fire Ready Nation Act and a tripling of 2026 federal funding to 3.7 billion dollars, is likely to expand task orders and long duration contracts, supporting sustained revenue growth and higher earnings visibility.
• Increasing frequency of wildfire incidents alongside a policy shift toward aggressive early detection and initial attack is driving greater demand for Bridger's Super Scoopers and multi mission aircraft. This should lift fleet utilization, reduce seasonality and support margin expansion through operating leverage.
• The new 331.5 million dollar credit facility and 49 million dollar sale leaseback transaction materially increase fleet financing capacity and enable Bridger to acquire additional aircraft and potentially bring the Spanish Scoopers on balance sheet. This should scale deployed assets and support higher adjusted EBITDA and free cash flow over time.
• Integration of real time sensor imagery with the Ignis mobile platform and live streaming capabilities for agencies like the Department of the Interior positions Bridger to win more multi mission and data rich contracts that command premium pricing. This may improve revenue mix quality and support stronger net margins.
• Expansion of year round and nonfire work through FMS defense contracts and other nonseasonal aviation services is expected to diversify end markets, smooth cash flows and increase baseline earnings. At the same time, incremental long term state and federal exclusive use contracts may enhance recurring revenue and capital efficiency.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Bridger Aerospace Group Holdings's revenue will grow by 1.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from -15.5% today to 44.3% in 3 years time.
• Analysts expect earnings to reach $60.9 million (and earnings per share of $-0.56) by about December 2028, up from $-20.2 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 7.0x on those 2028 earnings, up from -4.9x today. This future PE is lower than the current PE for the US Commercial Services industry at 24.3x.
• Analysts expect the number of shares outstanding to grow by 2.44% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.54%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Wildfire policy continues to emphasize earlier and more aggressive suppression, which is positive for public safety but could structurally cap the number of large, prolonged fires and related task orders. This could limit upside in flight hours and long term revenue growth.
• Heavier reliance on federal and state funding, including expectations tied to a tripling of the Wildland Fire Service budget, leaves Bridger exposed to political and budgeting delays similar to those already impacting FMS. This could pressure revenue visibility and earnings stability.
• The expanded 331.5 million dollar senior secured credit facility and 49 million dollar sale leaseback increase financial leverage and fixed obligations. Any downturn in fleet utilization or contract renewals could quickly erode cash flows, compress net margins and reduce earnings.
• Strategic bets on Spanish Scoopers, Ignis and broader multi mission defense work require successful execution and scaling. If these newer platforms fail to convert pilot programs and bids into sizable recurring contracts, the company may face lower asset returns, weaker adjusted EBITDA and softer long term earnings.
• If climate patterns, new technologies or competing suppression strategies shift demand away from Bridger's current asset mix, such as Super Scoopers and manned surveillance aircraft, the company risks stranded or underutilized capacity. This would weigh on revenue, depress operating leverage and reduce net income over time.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $5.25 for Bridger Aerospace Group Holdings based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $137.5 million, earnings will come to $60.9 million, and it would be trading on a PE ratio of 7.0x, assuming you use a discount rate of 10.5%.
  
• Given the current share price of $1.78, the analyst price target of $5.25 is 66.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.