Embraer S.A. ( ERJ Quick Quote ERJ - Free Report) was recently awarded the Type Certificate by the Civil Aviation Administration of China (“CAAC”) for its E195-E2 jets after the successful approval received from the authority for its E190-E2 in November 2022. This will expand Embraer’s presence in the Chinese aviation market, thus potentially leading to increased sales from China in the days ahead. Embraer’s Prospects in China
China is poised to show rising domestic demand for traveling, which is likely to boost the growth of the civil aviation market. Per the CAAC, China’s domestic passenger traffic volume recorded growth of a whopping 135% to reach 224.8 million year to date compared to the 2022 levels, thus effortlessly surpassing the 2019 levels.
Per Embraer’s latest 20-Year Market Outlook, the Asia Pacific, including China, is poised to witness growth of 4.4% per year in its Revenue Passenger Kilometers over 20 years. The report also suggests the possible thriving demand for narrow-body aircraft in the up to 150-seat segment in China.
This unfolds immense opportunities for Embraer, which is currently seeking to broaden its presence in the region to capitalize on the probable growing demand. The recently acquired certification by the CAAC is a step forward for the company in fulfilling its commitment to solidifying its positioning in China’s aviation market.
Peers to Gain
Apart from Embraer, aircraft manufacturers in the industry that have an established position in China and may gain from the flourishing demand are as follows:
Airbus ( EADSY Quick Quote EADSY - Free Report) : The company enjoys significant demand in the region, with its service fleet in China rising to more than 2,100 aircraft up to 2023, implying more than 50% of the market.
In April 2023, Airbus reached an agreement in the region to expand the A320 Family’s final assembly capacity with a second line at its Tianjin site. The agreement will contribute to Airbus’ overall rate objective of 75 aircraft per month in 2026 throughout its global production network.
Boeing ( BA Quick Quote BA - Free Report) : The company witnesses strong demand in China. More than 50% of commercial jetliners operating in China are Boeing airplanes.
The aerospace giant secured an order for eight 787-9 Dreamliners at the 2023 Paris Air Show in June 2023. With this order, the carrier will introduce 24 super-efficient 787s over the next several years.
In the past year, shares of Embraer have rallied 40.6% against the
industry’s decline of 6.5%. Image Source: Zacks Investment Research Zacks Rank
Embraer currently carries a Zacks Rank #3 (Hold). One better-ranked stock in the same industry is
Textron ( TXT Quick Quote TXT - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
The Zacks Consensus Estimate for Textron’s 2023 sales suggests a growth rate of 32.2% from the prior-year reported figure. The Zacks Consensus Estimate for TXT’s 2024 sales calls for a growth rate of 7.7% from the prior-year estimated figure.
TXT has a long-term earnings growth rate of 11.7%. Shares of Textron have risen 16.3% in the past year.