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Embraer (ERJ) Q3 Earnings Lag Estimates, Deliveries Drop Y/Y

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Embraer SA (ERJ - Free Report) incurred third-quarter 2018 adjusted loss of 16 cents per American Depository share (ADS), while the Zacks Consensus Estimate for earnings was pegged at 6 cents. The bottom line also deteriorated compared with earnings of 36 cents in the year-ago quarter.

Barring one-time items, the company incurred GAAP loss of 12 cents per share against the earnings of 57 cents in the prior-year period.

Revenues

Embraer’s third-quarter revenues came in at $1,151.7 million, lagging the Zacks Consensus Estimate of $1,378 million by 16.4%. Moreover, the top line declined 11.5% year over year, primarily on account of lower revenues at the Commercial Aviation, which were down by 45.3%.

Embraer-Empresa Brasileira de Aeronautica Price, Consensus and EPS Surprise

 

Order and Delivery

Embraer delivered total of 39 jets in the reported quarter, down 13.3% year over year. Of these, deliveries to the commercial aviation market and the business aviation market included 15 and 24 jets, respectively. Whereas in third-quarter 2017, the company had delivered 25 jets to the commercial aviation market and 20 in the business aviation market.

Embraer’s backlog at the end of the quarter under review was $13.6 billion, down from $18.8 billion in the year-ago quarter.

Operational Highlights

In the third quarter, Embraer’s cost of sales and services was $941.8 million, down from $1,064.8 million in the prior-year quarter.

Consequently, the company’s gross profit was down 11.3% to $209.9 million.

Embraer posted quarterly adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $104.8 million compared with $133.6 million in the year-earlier quarter.

Financial Update

As of Sep 30, 2018, the company’s cash and cash equivalents were $1,648.8 million compared with $1,132.6 million as of Jun 30, 2018.

Embraer had net debt of $880.5 million as of Sep 30, 2018, up from $721.2 million as of Jun 30, 2018.

Net cash inflow from operating activities was $227.4 million compared with cash inflow of $146 million in the year-ago period.

The company’s adjusted free cash outflow was $166.4 million as of Sep 30, 2018 compared with free cash outflow of $22.8 million at the end of the year-ago period.

Guidance

For 2018, the company reaffirmed its guidance. Embraer continues to expect to deliver 85-95 jets in the Commercial Aviation segment along with 70-80 light jets and 35-45 large jets in the Executive Jets segment.

Zacks Rank

Embraer carries a Zacks Rank #5 (Strong Sell).

Upcoming Defense Release

Transdigm Group (TDG - Free Report) is expected to report third-quarter 2018 results on Nov 8. The company has an Earnings ESP of +0.05% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Textron Inc. (TXT - Free Report) reported third-quarter 2018 adjusted earnings from continuing operations of 61 cents per share, which missed the Zacks Consensus Estimate of 76 cents by 19.7%.

Lockheed Martin Corp. (LMT - Free Report) delivered third-quarter 2018 earnings of $5.14 per share, beating the Zacks Consensus Estimate of $4.32 by 19%. The bottom line also improved 54.8% from the year-ago quarter’s figure of $3.32.

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