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Embraer SA Beats Q2 Earnings Estimates on Higher Deliveries

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Embraer SA’s (ERJ - Free Report) second-quarter 2014 earnings of 70 cents per American Depository Shares (ADS) spiked 40% from 50 cents per ADS in the prior-year quarter. The reported figure also beat the Zacks Consensus Estimate of 63 cents by 11.1%.

The better-than-expected results were attributable to strong defense and executive jet deliveries.

Total revenue

Net revenue was $1,761.3 million, up 13.1% from $1,557 million in the year-ago quarter and ahead of the Zacks Consensus Estimate of $1,655 million by 6.4%. The upside was driven by strong performance from both the Defense & Security as well as Commercial Executive Jets segments. In addition, the company’s efforts to diversify its business beyond its commercial dealings boosted the top line.

Order and Delivery

In the second quarter of 2014, the jet manufacturer delivered a total of 58 jets, up 70.6% sequentially and 13.7% year over year.

Of the total deliveries, 29 jets were delivered to the commercial aviation market including 16 E-175s, 8 E-190s and 5 E-195s. The remaining 29 jets, inclusive of 22 light and 7 large ones, were delivered to the executive aviation market.

As on Jun 30, 2014, Embraer had a firm order backlog of $18.1 billion. In terms of aircraft breakdown, the company’s order backlog comprised 167 E-175s, 100 E-175-E2s, 62 E-190s, 50 E-195-E2s, 50 E-190-E2s and 11 E-195s.

Segment Details

Commercial Aviation revenues, comprising 55.2% of total quarterly revenues, increased 13% year over year to $971.9 million.

Executive Jets revenues, representing 23.9% of total quarterly revenues, surged 13.8% year over year to $420.6 million.

Defense & Security generated revenues of $357.0 million that accounted for 20.3% of total second quarter sales and increased 15.5% from the year-ago period.

The Other category accounted for 0.6% of total second quarter revenues, declining almost 31% year over year to $11.8 million.

Financial Update

Cash and cash equivalents were $1,383.1 million as of Jun 30, 2014, compared with $1,683.7 million as of Dec 31, 2013.

As of Jun 30, 2014, the company's total debt was $2,412.5 million, up from $2,224.2 million as of Dec 31, 2013.

In the second quarter 2014, Embraer’s net cash from operating activities was $140.1 million versus $412.6 million in second quarter 2013.

Capital expenditure was $60.3 million, down from $124.8 million in the second quarter 2013.


In its guidance issued earlier in February, Embraer projected 2014 total revenues in the range of $6.0 billion to $6.5 billion. Embraer expects 2014 revenues to increase slightly from 2013 levels on the back of its Defense & Security and Executive Jets segments.

The company expected EBIT margin in the range of 9.0%−9.5% for 2014.

In addition, the company has also maintained its prior investment guidance of around $0.7 billion for 2014. This comprises $0.08 billion of research, $0.3 billion of product development and $0.2 billion of capital expenditure.

Other Releases

Pentagon’s prime contractor, Lockheed Martin Corp. (LMT - Free Report) posted impressive second quarter 2014 earnings before the opening bell in spite of the uncertain budget environment. The company reported quarterly earnings of $2.76 per share, comfortably surpassing the Zacks Consensus Estimate of $2.66 by 3.8%.

Another defense major, Northrop Grumman Corp. (NOC - Free Report) reported second-quarter 2014 adjusted earnings of $2.04 per share, lagging the Zacks Consensus Estimate of $2.20 by 7.3%. However, earnings were 3.6% higher year over year.

Aerospace giant The Boeing Company (BA - Free Report) delivered upbeat second quarter 2014 results backed by robust deliveries. The company reported adjusted second quarter 2014 earnings of $2.42 per share, beating the Zacks Consensus Estimate by 19.8%. The quarterly number rose an impressive 44.9% from $1.67 per share a year ago.

Zacks Rank

Embraer currently has a Zacks Rank #2 (Buy).

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