The gradual economic recovery is encouraging almost all the industries to open up. The airline industry, which took a big hit during the recession, is also looking for opportunities as fuel prices are in their low-90s, down from $150 per barrel in 2008.
Empresa Brasileira de Aeronautica S.A. or Embraer (ERJ), the largest Brazilian aircraft manufacturer, delivered 92 aircraft during the fourth quarter of fiscal 2010 compared with 44 aircraft in the third quarter of fiscal 2010. These 92 aircraft include 30 deliveries to commercial aviation, 61 to executive aviation and 1 to the defense segment.
During the fourth quarter, Embraer delivered the first large category Legacy 650 executive jet to Amsair Aircraft Limited, and the first Phenom 100 entry level jet to India’s Invision Air Services Pvt. Ltd., a Mumbai-based on-demand air charter company.
During fiscal 2010, Embraer delivered a total of 246 jets including 17 to commercial aviation, 8 to executive aviation and 2 to the defense segment. Embraer recorded a firm order backlog of $15.6 billion, marginally up from $15.3 billion at the end of third quarter of fiscal 2010.
Embraer’s product portfolio supports stronger customer orders and deliveries. Embraer is experiencing strong orders for its 170/195 jet. The company is planning to deliver the mid-sized Embraer MSJ or Legacy 450 and the mid-light Embraer MLJ or the Legacy 500 by the second half of fiscal 2012 and 2013, respectively.
Embraer received five contracts for the KC-390 defense aircraft in the first quarter of fiscal 2010. Hence, it is expected to sell at least 54 KC-390 defense aircraft beginning fiscal 2015. The Defense segment contributes a significant part of Embraer’s revenues. During the nine months ended September 30, 2010, the segment contributed 13.0%.
For the longer term, we reiterate our Neutral recommendation on Embraer. The ADS currently retains its short-term Hold rating with the Zacks #3 Rank.
EMBRAER AIR-ADR (ERJ): Free Stock Analysis Report
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