The largest Brazilian aircraft manufacturer, Empresa Brasileira de Aeronautica S.A., or Embraer (ERJ), formed a $1.0 billion agreement with NetJets Inc., worldwide leader in private aviation, to supply 50 Phenom 300 executive jets, with an option of up to 75 jets. The delivery of the same will begin from fiscal 2013.
In the middle of October 2010, Embraer signed an agreement with Air Lease Corp., for the delivery of 15 firm EMBRAER 190 jets from June 2011.
During the third quarter of fiscal 2010, Embraer delivered a total of 44 aircrafts, including 20 commercial jets and 24 executive jets, a decrease from 69 deliveries in the second quarter of 2010. However, the order backlog remained flat at $15.3 billion.
Embraer’s product portfolio supports stronger customer orders and deliveries. Embraer is experiencing strong orders for its 170/195 jet and the Legacy. 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.
Further, Embraer received five contracts for KC-390 defense aircrafts in the previous quarter and hence it is expected to sell at least 54 KC-390 defense aircrafts beginning fiscal 2015.The Defense segment contributes a significant part of Embraer’s revenues, as during the second quarter of fiscal 2010 alone, the segment contributed 13.0%.
The defense aircraft contract as well as changes in the U.S. Defense budget would influence the segment. However,the 4% and 2.8% year-over-year increases in the US defense budget for fiscal 2010 and fiscal 2011, respectively, would drive results in the coming quarters. The stock currently retains its short-term ‘Hold’ rating with the Zacks #3 Rank.
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