Embraer S.A. ERJ recently announced a deal with Royal Jordanian Airlines for the supply of four E190-E2 and four E195-E2 jets. Per the deal, the company will provide eight E2 Jets to the airlines for $635 million. Out of this, Embraer plans to cover six aircraft from Azorra's existing backlog with Embraer and two newly built jets.
Such orders continue to bolster Embraer’s business growth prospects and allow a steady flow of income in the business. The latest agreement is expected to be followed by more order inflows for Embraer’s jets in the coming days, with Royal Jordanian Airlines aiming at expanding its fleet by including jets that offer superior performance and operational efficiency.
What Lies Ahead?
Per the report released by the International Air Transport Association in March 2023, the recovery of global passenger traffic measured by Revenue Passenger Kilometers (“RPK”) has been strong, reaching 88% of the 2019 level.
The RPK can be expected to improve, considering the rise in travel demand for both domestic and international traveling. This boosts the prospects of major airlines in the industry, which tends to bolster profits for jet manufacturers like Embraer, which already enjoy strong market demand for E-jets worldwide.
As of Mar 31, 2023, Embraer’s E-Jets E2 had 281 orders in the backlog, reflecting a value of $17.4 billion. The steady order inflow, like the latest one, is likely to be instrumental to its backlog and future revenue generation prospects.
Per the report from Mordor Intelligence, the aviation market is likely to witness a CAGR of more than 5% during the 2023-2028 period. This translates to the compelling growth trajectory for aircraft makers like Embraer.
Opportunities for Peers
Aerospace majors — Airbus SE EADSY, Textron TXT and Boeing BA — boast a strong order backlog and are likely to gain from the rebound in air traveling demand.
Airbus boasts an order backlog of 7,254 commercial aircraft as of Mar 31, 2023 compared with the order backlog of 7,023 commercial aircraft as of Mar 31, 2022.
The Zacks Consensus Estimate for Airbus’ 2023 earnings has been revised upward by 4%. The Zacks Consensus Estimate for EADSY’s 2023 sales implies a growth rate of 18.5% from the prior-year reported figure.
Textron’s Textron Aviation business segment revenues increased 10.5% year over year to $1,149 million in the last reported quarter. The order backlog at the end of the quarter was $6.5 billion.
Textron boasts a long-term earnings growth rate of 11.2%. The Zacks Consensus Estimate for TXT’s 2023 earnings suggests a growth rate of 27.2% from the prior-year reported figure.
Boeing delivered 130 commercial planes during the quarter under review, up 37% year over year. The backlog for commercial airplanes remained healthy, with more than 4,500 airplanes valued at $334 billion.
Boeing boasts a long-term earnings growth rate of 4%. The Zacks Consensus Estimate for BA’s 2023 sales suggests a growth rate of 18% from the prior-year reported figure.
In the past year, shares of Embraer have rallied 34.9% against the industry’s decline of 1.2%.
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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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