Embraer (ERJ) Doubles Service Units to Give Prompt Assistance
Embraer ERJ has announced that it is doubling its maintenance service capacity in the United States to support continued growth of its executive jets' customer base through the addition of three Executive Aviation Maintenance, Repair and Overhaul facilities in Dallas Love Field, TX, Cleveland, OH and Sanford, FL. Maintenance service at these locations is set to begin in the second quarter of 2024.
Demand for Embraer Jets Rising
Courtesy of steadily increasing air travel worldwide, Embraer continues to witness a strong demand for its aircraft.
In the third quarter, the company delivered 43 jets, up 30.3% from the prior-year quarter’s level. In particular, Embraer is witnessing an increased demand for its E-jets, with E2 being the second generation of this jet family of commercial aircraft.
The company had nine E2 deliveries in the third quarter, reflecting a massive 800% improvement from the year-ago quarter’s level. Such strong jet deliveries must have enabled the company to register a solid revenue growth of 38% year over year.
Embraer is expected to end 2023 on a solid note, with its commercial jet deliveries projected in the band of 65-70 jets. Executive Aviation deliveries are expected in the band of 120-130 aircraft.
A significant volume of new orders for aircraft is coming from customers in the United States. An increase in service capacity will address the needs of its customers in the United States more promptly. As ERJ’s Executive Jets fleet has been growing rapidly over the last several years due to continued strong demand across the entire product portfolio, it will also increase the requirement for after-sales services, maintenance and repairs of these aircraft.
Opportunities in Aerospace
Per the report from Allied Market Research, the global commercial aircraft market is expected to witness a CAGR of 4.2% over the 2021-2030 period. This entails significant demand for commercial jets in the days ahead, which can positively impact the prospects of aircraft manufacturers.
Embraer is also benefiting from the revival of orders in commercial aerospace, with its backlog at the end of the third quarter rising to $17.8 billion from $17.3 billion at the end of the second quarter of 2023.
Such a solid backlog is a testament to the quality of aircraft produced by the company and the willingness of customers to wait for the desired aircraft. The rising backlog and eventual delivery of the same to clients result in significant revenue growth.
Other companies that are likely to benefit from the growing commercial aircraft market are Airbus SE EADSY, Textron TXT and Boeing BA.
Airbus is one of the forerunners in the commercial aircraft segment. Its order backlog amounted to 7,992 commercial aircraft at the end of September 2023.
Airbus’ long-term (three- to five-year) earnings growth rate is pegged at 12.4%. The Zacks Consensus Estimate for 2023 EPS reflects year-over-year growth of 8.5%.
Boeing has been the premier manufacturer of commercial jetliners for decades. Its backlog at the end of the third quarter was $469.18 billion, up from $439.56 billion recorded at the end of the second quarter of 2023.
Boeing’s long-term earnings growth rate is pinned at 4%. The Zacks Consensus Estimate for 2023 EPS reflects year-over-year growth of 45.8%.
Textron Aviation’s principal markets include general aviation aircraft, business jets and commercial transportation. The segment’s order backlog at the end of the quarter totaled $7.4 billion.
Textron boasts long-term earnings growth rate of 11.7%. The Zacks Consensus Estimate for 2023 EPS reflects year-over-year growth of 36.8%.
Price Movement
In the last six months, shares of Embraer have rallied 25.2% against the industry’s decline of 3.1%.
Image Source: Zacks Investment Research
Zacks Rank
Embraer currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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