Friday, June 24, 2022

Renewed Optimism is Surrounding Embraer S.A. (ERJ)

Many stocks have been testing new highs in 2020, and one of the most notable is Embraer S.A. (ERJ). Currently, ERJ is trading at $8.80 and the avg recommendation for the stock is Moderate Buy. while the current analyst price target stands at $9.61.

To add more color to this target, the company’s high over the last year is $20.92 and the low is $3.99. Over the last 52 weeks, ERJ is down -57.93% while the S&P 500 is up 1.21%. The catalyst for this interesting swing was the company’s recent earnings report.

A Notable Earnings Report

In the last quarter, ERJ reported a profit of $184.0 million. Embraer S.A. also saw revenues increase to $633.8 million. In addition, ERJ has free cash flow of -$648.7 million as of 03-2020 The company’s EBITDA came in at $10.1 million which compares well with its peers.

ERJ booked profit margins of -22.80%, its Return on Equity (ROE) is -16.00%, and its Return on Assets is -5.10%. All told, it is clear that, ERJ needs to be on your watchlist.

About Embraer S.A.

If readers are unfamiliar, Embraer S.A. designs, develops, manufactures, and sells aircraft and systems in Brazil, North America, Latin America, the Asia Pacific, Europe, and internationally. It operates through Commercial Aviation, Defense and Security, Executive Jets, Service & Support, and Other segments. The Commercial Aviation segment develops, produces, and sells commercial jets; and provides support services, as well as leases aircraft. Its products include ERJ 145 family, EMBRAER 170/190 family, and E-Jets family of commercial aircraft. The Defense and Security segment engages in the research, development, production, modification, and support for military defense and security aircraft, as well as offers a range of products and integrated solutions that include radars, special space systems (satellites), and information and communications systems, such as command, control, communications, computer, intelligence, surveillance, and reconnaissance systems. The Executive Jets segment develops, produces, and sells executive jets; and offers support services. It also leases Legacy 600 and Legacy 650 executive jets in the super midsize and large categories; Legacy 450 and Legacy 500 executive jets in the midlight and midsize categories; Phenom family executive jets in the entry jet and light jet categories; Lineage 1000, an ultra-large executive jet; and Praetor 500 and Praetor 600, disruptive executive jets in the midsize and super midsize categories. The Service & Support segment after-service solutions and support services. The Other segment is involved in the supply of fuel systems, structural parts, and mechanical and hydraulic systems; and production of agricultural crop-spraying aircraft. The company has a strategic partnership with The Boeing Company. The company was formerly known as Embraer-Empresa Brasileira de Aeronautica S.A. and changed its name to Embraer S.A. in November 2010. Embraer S.A. was founded in 1969 and is headquartered in Sao Paulo, Brazil.

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Of course, we must look beyond the financials and question how well those numbers represent the sustainable earnings power of the business. Investors need to know how sustainable this current run. ERJ has a short ratio of 1.75 and outstanding shares of 184.03M.

Company Outlook

ERJ has seen increased volume after this news and investors are putting their support behind the value proposition. Furthermore, 10-day volume stands at 7.54 million and more growth is possible in the weeks ahead. Traders will also note the company’s earnings per share came in at -1.89. Embraer S.A. ERJ also noted assets of $10.86 billion at the end of the last quarter. Investors should also keep an eye on sector updates as ERJ has historically followed its peers on positive news.

All told, Embraer S.A. ERJ has strung together solid data and demonstrated underlying fundamentals. At its current valuation, ERJ represents an interesting risk/reward case. Traders should stay tuned to see if this recent report will push the stock to test recent resistance levels.

Embraer S.A. ERJ is now commanding a market cap of 1.56B and a float of 174.78M. ERJ is increasing its credibility in this sector and that could lead to more upside down the line. Sign-up for continuing coverage on shares of ERJ stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in ERJ, either long or short, and we have not been compensated for this article.

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