ERJ's 1st US Customer for New E175

Zacks

Embraer S.A. (ERJ) entered into a contract with Republic Airways Holdings Inc. (RJET) involving the sale of 47 EMBRAER 175 jets. The jets will be used by Republic Airlines, a subsidiary of Republic Airways, operated under the American Eagle brand. The deal includes an option of additional 47 jets, subsequent to which the contract will be valued at $4 billion. The first jet is scheduled to be delivered by mid 2013.

The company is the leader in 70-120 seat jets segment and has 60 airlines in 40 countries as its customers. With a target to expand further, Embraer has included many new features to its existing E-Jets like addition of new wingtips and increase of fuel efficiency to the tune of 5%.

Republic will be the first to receive the enhanced E175, with an existing Embraer fleet of 132 E-Jets, which will grow further to 179 with this contract.   

The deal is expected to revive earnings expectations for the company, which came down after the company lost a major contract from Delta Airlines to its rival, Bombardier Inc., a Canadian company. The stock price grew by a whopping 9.1% after the announcement of the contract, trading at $31.16 per share. The contract is subject to regulatory approvals, which are to be granted in the first quarter of 2013.

Embraer is expected to release its fourth quarter 2012 results on Mar 18, 2013. With a Zacks Rank #5 (Strong Sell) and a Zacks Earnings ESP of -9.8%, it is most likely that the company will miss its Zacks Consensus Estimate of 82 cents for the quarter.

Other stocks to watch out for in the industry are Erickson Air-Crane Inc. (EAC) and Huntington Ingalls Industries Inc. (HII). These companies hold a Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy), respectively.

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