The market is still robust for regional aircraft maker Embraer S.A. (ERJ). The company recently surprised on the Zacks Consensus for the 3rd consecutive quarter. This Zacks #1 Rank (strong buy) has a price-to-book ratio of only 1.8 which puts it into the value category.
Embraer is the largest manufacturer of commercial jets up to 120 seats in the world. Headquartered in Brazil, it has operations in Brazil, the U.S., France, Portugal, China and Singapore.
Embraer Surprised By 71% in the First Quarter
On May 2, Embraer reported first quarter results and surprised on the Zacks Consensus by 24 cents. Earnings per share were 58 cents, well above the consensus of just 34 cents. This was also a big improvement on the first quarter of 2010 wherein EPS was just 13 cents.
Revenue rose 6.3% to $1.06 billion from $922 million in the first quarter of 2010 due to aircraft deliveries and product mix. The company delivered 20 jets to the commercial aviation market and 8 to the executive aviation market including 6 light jets and 2 large jets.
The backlog rose $400 million to $16 billion by the end of the first quarter from the end of 2010.
Zacks Consensus Estimates Rise
Given the big beat, analysts moved to raise full year estimates.
The 2011 Zacks Consensus Estimate rose 11 cents to $2.11 over the last 60 days. That is earnings growth of 9.8%.
2012 is expected to be hotter, with the 2012 Zacks Consensus rising to $2.50 from $2.42 in the last 2 months. That is further earnings growth of 18.6%.
Shares Near 3-Year High
Shares hit a new 3-year high in 2011 but have been treading water for most of that time.
Still, valuations are firmly in the value category. In addition to a P/B ratio under 3.0, which is the usual cut-off I use for “value”, the stock also has a forward P/E of 14.7. I use 15x as my parameters for a value stock.
The demand for regional jets, especially from the emerging markets, should only increase as more people move into the middle class and travel becomes the norm. At current valuations, Embraer’s shares are an attractive way to play this market.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.
EMBRAER AIR-ADR (ERJ): Free Stock Analysis Report
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