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Embraer (ERJ) & Nidec's JV to Develop Electric Propulsion Systems

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Embraer S.A. (ERJ - Free Report) and Japan’s Nidec Corporation (NJDCY - Free Report) announced an agreement to establish a joint venture (“JV”) company, called Nidec Aerospace LLC, to develop electric propulsion systems for the aerospace sector.

Set to be unveiled at the 54th biennial Paris Air Show, the venture intends to open up new possibilities by offering a diverse range of products and services globally. This is anticipated to be driven initially by the growth of the Urban Air Mobility (“UAM”) industry.

Nidec will own a 51% share in Nidec Aerospace and Embraer the remaining 49%. With this deal, two top-tier engineering companies will combine their complementing synergies and unique areas of expertise to launch a new age of air mobility.

The JV is still pending approval from both companies' boards of directors, antitrust approvals, other potential regulatory clearances and customary closing conditions. The companies expect the transaction to close in the second half of 2023.

Rationale Behind the Agreement

The companies are adopting advanced technologies to create fresh opportunities for electric propulsion systems market. Due to the physical constraints of spacecraft, the development and integration of strong yet compatible electric propulsion systems are encouraged to conduct orbital correction operations successfully.

Electric propulsion is growing fast in popularity owing to its cost and operational advantages. The global electric propulsion systems’ market share is expected to grow at a CAGR of 19.33% during 2021-2030.

The JV’s electric propulsion system’s launch-customer will be the eVTOL manufacturer of Eve Air Mobility (EVEX - Free Report) , an independent company well poised to be a global leader in the UAM segment by delivering an effective and sustainable new mode of urban transportation.

Price Performance

In the past three months, shares of Embraer have risen 10% against the industry’s 1.1% decline.

 

Zacks Investment Research
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Zacks Rank & Stock to Consider

Embraer currently has a Zacks Rank #3 (Hold).

A better-ranked stock from the same industry is Sidus Space (SIDU - Free Report) , carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for SIDU’s 2023 earnings per share indicates an improvement of 64% from that recorded in the previous year. The same for 2023 sales indicates growth of 42.1% year over year.

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