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Embraer’s Q3 Deliveries Down Y/Y, Backlog Jumps to $18.8B

Zacks

Embraer S.A. ERJ recently reported third-quarter 2017 deliveries of 45 jets compared with 54 in the year-ago period, reflecting a 16.7% decline. The deliveries were also 23.7% lower than the second-quarter level.

The company delivered 25 and 20 jets, respectively, in commercial and business aviation markets in the quarter compared with 27 jets each in the prior-year period. Deliveries to the executive aviation market included 13 light and seven large executive jets.

Q3 Backlog

Embraer exited the third quarter with a backlog of orders worth $18.8 billion, higher than the second-quarter level of $18.5 billion.

During the quarter, Embraer received orders from SkyWest Inc. SKYW for 45 new aircraft. Again in September, the company bagged an order of 25 E-Jets worth $1.1 billion, based on current list prices. All these aircraft are scheduled to be delivered in 2018.

In the beginning of October, the company had announced a second order from SkyWest for 20 additional E-Jets. At current list prices, the order is estimated to be valued at $914 million. Notably, this order has also been added to Embraer’s third-quarter 2017 backlog.

Long-Term Outlook

Embraer expects total market deliveries of 6,400-2,300 jets in the 70-to-90 seat segment and 4,100 units in the 90-to-130 seat segment by 2035. The 70-to-130 seat worldwide fleet in service is anticipated to increase from 2,670 jets in 2015 to 6,690 by 2035, making it the fastest growing segment.

The Boeing Company’s BA research report projects that the world will need 41,030 new planes, worth $6.1 trillion between the years 2017 and 2036. The company expects single-aisle jets to be the major growth-driver behind surge in demand, comprising 72% of the total projection. This reflects a worldwide demand for 29,530 single-aisle jets, worth $3.2 trillion, in the next 20 years. Additionally, Boeing anticipates the commercial fleet to be fuelled by sustained 4.7% annual growth in commercial passenger traffic.

Significantly, the larger commercial aircraft category is already dominated by the monopoly of aerospace behemoths like Boeing and Airbus Group SE EADSY. Still the improved outlook for commercial jets is estimated to boost growth for Embraer as well, going forward.

Q3 Order Details of Peers

Boeing’s third-quarter order details show the company having booked 127 net commercial orders (accounting for cancellations). The figure suggests a drop from the preceding year’s count of 150.

Additionally, Boeing delivered greater number of planes to global customers. Specifically, it delivered 202 commercial aircraft in the third quarter.

Price Movement

Shares of Embraer have gained 31.7% in a year’s time, substantially underperforming the industry’s gain of 55.4%. This underperformance may have been caused due to the weakening Brazilian real against the U.S. dollar. Also, the softness observed in the company’s Defense and Security business remains a concern.



Zacks Rank

Embraer carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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