Embraer: Parallel to Industry – Analyst Blog

Recently, Empresa Brasileira de Aeronáutica S.A. – Embraer (ERJ) reported the jet deliveries made during the first quarter of fiscal 2010.

 

During the quarter, total jet deliveries were 41 compared to 40 in the year-ago quarter. However, firm order backlog slipped 3.6% year over year from $16.6 billion to $16.0 billion.

 

Out of 41, 21 were for the commercial aviation segment, 19 for executive aviation and only one for the defense segment. During the quarter, the company signed contracts with Gulf Air and Libya’s Petro Air for delivering two Embraer 170 jets each through ECC Leasing.

 

Embraer expects to deliver a total of 227 jets during fiscal year 2010 almost flat compared to 2009. Also the company is planning to deliver the mid-size Embraer MSJ or Legacy 450 and the mid-light Embraer MLJ or Legacy 500 by the second half of 2012 and 2013, respectively with an estimated investment of US$750 million in fixed assets and research & development.

 

The airline industry is expected to show some improvements in 2010. However, it will take years for the industry to revive. We remain optimistic on the strength of the company’s aircraft family. Moreover, full support from the Brazilian Government appears to be encouraging.

 

We reiterate our Neutral recommendation on Embraer based on risks relating to its high concentration on some models focusing primarily on American airline companies.