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Embraer's (ERJ) Arm Announces Partnership With Falko for eVTOL

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Embraer S.A.’s (ERJ - Free Report) subsidiary, Eve UAM, LLC (EVE), recently revealed a Letter of Intent that mentions a possible order of 200 of Eve’s electric vertical take-off and landing aircraft (eVTOL). The order has been awarded by an aircraft leasing company, Falko Regional Aircraft Limited (Falko). 

The Letter of Intent also entails a commercial partnership that emphasizes the development of the global network of eVTOL operators in a bid to support Urban Air Mobility ("UAM") missions.

Benefits of the Partnership

UAM is an evolving aviation market that emphasizes transforming mobility around metropolitan areas through a network of efficient air transportation systems for passengers and cargo. Through eVTOL, Embraer aims to offer a safe, accessible and eco-friendly air mobility ecosystem, thus capitalizing on the emerging trend.

Falko is a global leader in commercial regional aircraft leasing with a primary focus on growing regional aircraft sector opportunities. The proposed partnership brightens Embraer’s prospects in the UAM marketplace. Also, Falko’s global footprint, with a presence in the United Kingdom, Ireland and Singapore, provides Embraer an opportunity to expand in the global UAM market.

Considering Embraer’s excellence in manufacturing eVTOL aircraft and an anticipated rise in demand for eVTOL globally to support zero-emissions target, the company may clinch more such agreements going forward. Such transactions are expected to bolster ERJ’s revenues from the eVTOL aircraft line of business.

eVTOL’s Growth Prospects

The rising congestion in traffic in the metropolitan areas and the need for Urban air taxis are projected to drive demand for eVTOL aircraft in a bid to make commuting easy within the cities. Per the report from the Markets and Markets firm, the global market for eVTOL aircraft is anticipated to witness a CAGR of 15.3% during the 2021-2030 period.

Such growth projections provide ample prospects for companies like Embraer to capitalize and prosper in the emerging trend. Aerospace majors who boast the potential to benefit from the growing eVTOL aircraft market are Airbus SE (EADSY - Free Report) and Textron (TXT - Free Report) .

Airbus’ CityAirbus NextGen is an all-electric, four-seat vertical take-off and landing eVTOL multicopter concept featuring a wing. It boasts an 80-km range and a cruise speed of 120 km/h, which makes it perfect for zero-emission flight operations for a variety of applications in major cities.

Airbus’ average earnings surprise for the last two quarters was 69.70%. EADSY stock has rallied 21.5% in the past year.

Textron’s business segment, Bell, is working on the plans to launch an eVTOL, Bell Nexus. Bell Nexus 4EX is a four-duct vehicle, which is configurable in an electric or hybrid-electric platform. With a hybrid platform, Nexus 4EX promises an extended reach to travel farther or to more remote locations based on mobility needs.

Textron has a trailing four-quarter earnings surprise of 27.89%, on average. Shares of TXT have appreciated 53.8% in the past year.

Price Performance

Shares of Embraer have rallied 139.6% in the past year against the industry’s decline of 28.3%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Zacks Rank

Embraer currently carries a Zacks Rank #4 (Sell). A better-ranked stock from the same sector is Elbit Systems (ESLT - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past four quarters, Elbit Systems has surpassed the Zacks Consensus Estimate, with an average surprise of 25.86%. The Zacks Consensus Estimate for Elbit Systems’ 2022 earnings has improved 2.2% over the past 60 days.

Also, the Zacks Consensus Estimate for ESLT’s 2022 sales is expected to deliver growth of 3.7% from the prior-year estimated figure. Its shares have returned 29.2% to its investors in the past year.