Contract wins, customer orders servicing and test roll-outs have, over time, turned out to be customary for Brazilian planemaker Embraer S.A (ERJ). Adding one more to its order portfolio, Embraer recently announced sale of its A-29 Super Tucano aircraft to the U.S. Air Force. The Super Tucano, produced by Embraer Defense and Security for the Light Air Support (LAS) program, is anticipated to deliver a wide variety of munitions and operate in extremely rugged terrain and austere environment.
The aircraft will be supplied to the Air Force in partnership with Sierra Nevada Corporation (SNC) as the prime contractor. Moreover, it will be used to conduct advanced flight training, aerial reconnaissance and light air support operations. The sale agreement inked a firm-fixed price delivery order contract worth $355 million for the Light Air Support (LAS) aircraft and associated services.
The LAS mission requires a non-developmental solution that provides the versatility, engagement, and persistence for the warfighters in a counterinsurgency environment, at a significantly lower cost than fighter jets. The A-29 Super Tucano, currently used by five air forces, was built specifically for counterinsurgency missions. It has already proved capable for LAS missions helping the Colombian government defeat the FARC and other governments counter illegal activities.
Over time, Embraer has strengthened its position in the security business with a series of application including military transportation, intelligence, surveillance and reconnaissance systems, command and control systems, providing defense solutions for Brazilian and other governments worldwide; particularly U.S. The company expects to pursue the U.S. investment strategy further; with its commitment to deliver aircrafts on schedule and within the budget.
The new contract from U.S Air Force calls for twenty LAS aircrafts, ground training devices for pilot training along with the services toward maintenance and supply requirement support for the aircraft and associated equipments.
The company recently reported third quarter 2011 earnings with net revenue of $1,363.6 million, up from $1,044.0 million in 3Q10, based on the delivery of 28 jets to the commercial aviation market and 18 to the executive aviation market. At the end of 3Q11, Embraer has reported to maintain a firm order backlog, which summed up to $16 billion, primarily driven by sales activities in executive aviation.
Embraer S.A designs, manufactures and sells aircraft and aviation-related structural parts to the world’s commercial aviation, executive aviation and defense markets. The company’s product portfolio supporting strong customer orders and diversified global footprint, gives a tough competition to its peers, such as Boeing Co. (BA), Lockheed Martin Corporation (LMT), Northrop Grumman Corporation (NOC), etc.
We currently maintain a long-term Neutral recommendation on the stock. Embraer has a Zacks #3 Rank, which translates into a short-term Hold rating (1-3 months).
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