Brazilian aerospace manufacturer Embraer is the IBD Stock Of The Day for Tuesday as shares surged to a 10-year high.
Embraer produces a fleet of commercial, business and defense jets. On the commercial front, Embraer is best-known for its Embraer 175 (E175) single-aisle planes. It also manufacturers the C-390 military transport aircraft. The company's Phenom 300 has been the world's bestselling light jet for the past 12 years, according to a May announcement.
Embraer is coming off its major Q3 beat from Nov. 8, which saw earnings increase to $1.20 per share from 18 cents the year prior. Revenue jumped 32% to $1.69 billion, with sales from its "executive aviation" and "defense and security" segments each increasing 65% compared with a year ago.
The results were well above analyst expectations for earnings of 25 cents per share on $1.58 billion in revenue.
Embraer delivered 59 aircraft during the quarter, a 37% increase from the year prior. Executive jet deliveries totaled 41, with 16 commercial jets and two multimission C-390 aircraft. The company said that its backlog at the end of the quarter was worth $22.7 billion, marking a nine-year high and up 25% from last year.
Embraer narrowed its 2024 commercial aviation delivery forecast to 70-73 planes, down from its prior guidance for 72-80. The company maintained its executive delivery outlook of 125 to 135 jets.
The Brazilian outfit also reiterated its full-year revenue forecast for $6 billion to $6.4 billion, with the midpoint just below analyst views for $6.3 billion.
FactSet expects 2025 revenue increases to $7.26 billion, growing to about $8 billion in 2026.
Analysts Shift Targets, Ratings
However, analyst ratings have been mixed in the wake of earnings.
UBS in mid-November downgraded ERJ shares to sell from neutral, noting it thinks the market is "overoptimistic" heading into 2025, and results for the year may disappoint investors, The Fly reported. The firm wrote that the competitive environment is unfavorable to Embraer, as Brazil and other Latin American locations lack competitive advantages for its projects. Still UBS lifted its price target on ERJ shares to 32 from 29.
Elsewhere, Morgan Stanley and BofA both raised their targets on Embraer last week.
Morgan Stanley cited Q3 results and the company's investor day presentation as evidence of "the company's strong operating performance and ongoing momentum." The firm raised its price target by $5 to 45 and kept an overweight rating on the shares.
BofA on Thursday also lifted its price target on Embraer to 55 from 40 and maintained a buy rating on the stock to reflect stronger-than-expected deliveries and demand. The firm said Embraer's greatest differentiating factor is that innovation is core to the company identity. BofA also credited Embraer's strong backlog, deliveries and improving financials as "a testament to the strategy working."
Embraer Stock Rises
Embraer trades in American Depositary Receipts (ADRs) under the ticker ERJ.
ERJ stock surged more than 3% Tuesday to peak at 40.34, its highest level since September 2014.
The move cleared a 39.46 buy point, matching its Nov. 13 high.
The latest entry formed as a shelf pattern within a buy zone for its recent flat base.
Embraer broke out of that prior flat base pattern on Nov. 18.
ERJ shares rallied about 20% so far this month, adding to its almost 118% spike in 2024.
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