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Embraer (ERJ) Posts Wider-Than-Expected Q4 Loss, Suspends View

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Embraer SA ERJ incurred fourth-quarter 2019 adjusted loss of 51 cents per American Depository share (ADS), wider than the Zacks Consensus Estimate of a loss of 17 cents. and the year-ago quarter loss of 13 cents.

Including one-time items, the company incurred a GAAP loss of $1.14 per share against earnings of a penny in the year-ago quarter.

For 2019, the company reported adjusted loss of $1.18 per ADS, wider than the Zacks Consensus Estimate of a loss of 83 cents. In 2018, the company had incurred a loss of 30 cents.

Revenues

Embraer’s fourth-quarter revenues came in at $2,085 million, which increased 22.8% year over year. The year-over-year upside can be attributed to higher deliveries at all four major business units.

For 2019, the company posted revenues of $5.46 billion, which came almost in line with the mid-point of the company guided range of $5.3-$5.7 billion. The top line surpassed the Zacks Consensus Estimate of $2.32 billion. On a year-over-year basis, Embraer’s revenues grew 7.7%.

Order and Delivery

Embraer delivered 81 jets in the reported quarter, up 17.4% year over year. The company delivered 35 commercial and 46 executive (20 light and 26 large) jets compared with 33 commercial and 36 executive (24 light and 12 large) jets in the year-ago quarter.

Backlog at the end of the quarter was $16.8 billion compared with $16.2 billion in the year-ago quarter.

Operational Highlight

In the fourth quarter, the company’s cost of sales and services totaled $1,806 million, up from $1,436 million in the prior-year quarter.

Also, Embraer’s gross profit grew 6.6% to $278.6 million.

It posted quarterly adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $65 million compared with $133.5 million in the year-earlier quarter.

Financial Update

As of Dec 31, 2019, the company’s cash and cash equivalents amounted to $1,156 million compared with $1,281 million as of Dec 31, 2018.

Embraer had net debt of $1,347 million as of Dec 31, 2019, up from $439.9 million as of Dec 31, 2018.

Adjusted net cash generated by operating activities was $386 million at the end of 2019 compared with cash inflow of $316.8 million at 2018-end.

The company’s adjusted free cash outflow at the end of 2019 was $181.8 million compared with free cash outflow of $127.5 million at the end of 2018. The downside was on account of increased free cash usage in 2019, influenced by the separation costs of $120.8 million as well as higher capex and net development spending during the year.

Guidance

Due to the uncertainty related to the impact of the spread of COVID-19, Embraer has suspended its 2020 guidance for the time being.

Zacks Rank

Embraer currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Q4 Defense Releases

Teledyne Technologies TDY reported fourth-quarter 2019 adjusted earnings of $2.90 per share, which surpassed the Zacks Consensus Estimate of $2.76 by 5.1%. The bottom-line figure came above the guided range of $2.71-$2.76 for the reported quarter.

Lockheed Martin Corp. LMT reported fourth-quarter 2019 earnings of $5.29 per share, which surpassed the Zacks Consensus Estimate of $4.99 by 6%. The bottom line also improved 20.5% from $4.39 in the year-ago quarter.

General Dynamics Corporation GD reported fourth-quarter earnings from continuing operations of $3.51 per share, which beat the Zacks Consensus Estimate of $3.46 by 1.45%.

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