Embraer (ERJ) Lags Q1 Earnings Estimates on Higher Taxes - Analyst Blog

Embraer SA ERJ reported first-quarter 2015 adjusted earnings of 26 cents per American Depository Share (ADS), missing the Zacks Consensus Estimate of 30 cents by 21.2%. Quarterly earnings plunged 23.5% from 34 cents per ADS a year ago owing to higher taxes. The adjusted figure excludes deferred income tax and social contribution.

On a GAAP basis, Embraer incurred a loss of 34 cents per ADS as against earnings of 60 cents a year ago.

Total Revenue

In the first quarter, Embraer posted total revenues of $1,055.9 million, missing the Zacks Consensus Estimate by 20.5%. Reported revenues also decreased 15% year over year due to lower sales at the company’s Executive Jets (37.5%) and Defense & Security (45.9%) segments and Others (47.8%). However, its Commercial Aviation revenues advanced 19.3% during the quarter.

Order and Delivery

Embraer delivered a total of 32 jets in the first quarter compared with 34 in the prior year. The company delivered 20 commercial (comprising only E175 jets) and 12 executive jets (10 light jets and 2 large jets) in the quarter.

The company reported an order backlog of $20.4 billion at quarter end, down from $20.4 billion at 2014 end.

Operational Highlights

In the quarter under review, Embraer’s cost of sales and services was $805.6 million, down from $973.4 million a year ago.

The company’s gross profit decreased 6.9% year over to $805.6 million in the first quarter.

The company reported quarterly earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $149.1 million compared with $151 million in the prior-year quarter.

The company’s income tax expenses in the quarter were $118.0 million as compared to income tax gains of $17.7 million a year ago. The increase was mainly due to foreign exchange variation from the beginning to the end of the first quarter 2015, wherein the Real depreciated 21%, leading to non-cash deferred income tax expense on non-monetary assets.

Financial Update

Cash and cash equivalents were $1,064.8 million as of Mar 31, 2015, compared with $1,713 million as of Dec 31, 2014.

As of Mar 31, 2015, the company's debts were $581.3 million, up from $84.5 million as of Dec 31, 2014.

In the quarter, the company invested around $78.8 million as capital expenditure.

Guidance

Embraer had earlier provided guidance for 2015 net revenues, EBIT and EBITDA in the ranges of $6.1–$6.6 billion, $0.49–$0.56 billion and $73–$86 billion, respectively.

In 2015, the company plans to invest $0.65 billion, including capital expenditures of $0.3 billion.

The company expects to deliver 95–100 jets and 115–130 jets in the Commercial Aviation and Executive Jets segments, respectively.

Other Releases in the Sector

Aerospace giant The Boeing Company BA delivered first-quarter 2015 adjusted earnings of $1.97 per share, beating the Zacks Consensus Estimate of $1.81 by 8.8%. The quarterly number rose an impressive 11.9% from $1.76 per share a year ago.

Lockheed Martin Corp. LMT reported quarterly earnings of $2.74 per share, comfortably surpassing the Zacks Consensus Estimate of $2.48 by 10.5%. Earnings in the reported quarter however declined 4.5% from $2.87 per share a year ago, as lower fighter jet demand led to less revenue.
 
Northrop Grumman Corp. NOC delivered first-quarter 2015 adjusted earnings of $2.14 per share, missing the Zacks Consensus Estimate of $2.26 by 5.3%. The quarterly number decreased 7.4% from $2.31 per share a year ago.

Zacks Rank

Embraer currently has a Zacks Rank #5 (Strong Sell).
 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
NORTHROP GRUMMN (NOC): Free Stock Analysis Report
 
EMBRAER AIR-ADR (ERJ): Free Stock Analysis Report
 
BOEING CO (BA): Free Stock Analysis Report
 
LOCKHEED MARTIN (LMT): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research