Embraer Earnings Hit by Lower Sales - Analyst Blog
April 30 2013 - 5:10AM
Zacks
Brazil’s Embraer
S.A. (ERJ) reported first-quarter earnings of 17 cents per
American Depository Shares (ADS), down drastically by more than 98%
from the year-ago profit of 58 cents per ADS. The reported figure
also missed the Zacks Consensus Estimate of 43 cents by 60.5%. The
decrease was mainly due to the lower number of aircraft deliveries
and product mix.
Embraer delivered 29 jets in the first quarter of 2013 ending Mar
31, 2013, which fell short of the 34 deliveries made in the same
period last year.
Net revenue in the quarter was $1,085.9 million, down from $1,152.1
million in the year-ago quarter due to lower commercial and
executive aircrafts deliveries. Reported revenue also missed the
Zacks Consensus Estimate of $1,196.0 million.
Segment Details
The company’s new reporting segments, effective from the first
quarter 2013, include Commercial Aviation, Executive Aviation,
Defense & Security and Others.
Commercial Aviation revenues, comprising
58.9% of total revenue, declined 15.8% year over year to $639.6
million. The lower numbers were due to deliveries of 17 jets to the
commercial aviation market compared with 21 made in the year-ago
period.
Executive Aviation, representing 16.1% of
total quarterly revenue, delivered 12 jets (8 light jets and 4
large jets) during the reported quarter compared with 13 deliveries
in the first quarter of 2012. However, segment revenues grew 15.6%
in the reported quarter on a year-over-year basis.
The Defense & Security market with a
series of campaigns already underway for various applications is
looking good. At revenues of $251.7 million, the segment accounted
for 23.2% of total first-quarter sales and increased 10.4% from the
year-ago period.
The Other category accounted for 1.8% of
total first quarter revenue climbing almost 52% from the first
quarter of 2012.
Backlog
Embraer − the largest among Brazil’s aircraft manufacturers and the
world's third-largest commercial planemaker − had an order backlog
of approximately $13.3 billion at the end of the quarter, which
represented an $800 million increase from the year-end 2012 level.
The sequential improvement was mainly attributable to higher
Commercial Aviation orders as well as a continued stream of orders
in the Defense & Security segment.
In terms of aircraft breakdown, this includes 97 E-190, 80 E-175,
25 E-195 and 9 E-170 jets. The first-quarter backlog includes the
contract from Republic Airways Holdings Inc. for deliveries of 47
E175 jets. It also includes an order from Embraer Defense and
Security for the supply of 20 A-29 Super Tucano aircraft.
Meanwhile, Embraer received an order from United Airlines, a
subsidiary of United Continental Holdings, Inc.
(UAL) for 30 E-175 jets, with deliveries scheduled for next year
and the year after. The order is worth a combined $2.9 billion at
list prices and includes options for 40 additional E-175 jets.
Although the company’s quarterly earnings were hurt by rising labor
costs and a fall in commercial aircraft deliveries, this latest
contract will likely provide Embraer impetus for future growth.
Margins
Gross margin in the quarter was 22.2%, down 90 basis points from
23.1% in the same period last year. During the reported quarter,
product mix and the boost in wages led to a lower gross margin.
The EBIT margin came to 3.6% in the quarter versus 7.4% in the
first quarter of 2012. Rise in wages was the primary factor for the
margin decline.
Balance Sheet
Cash and cash equivalents were $1,684.3 million at the end of the
first quarter compared with $1,797.0 million at 2012 end.
At the end of the first quarter, the company's total debt increased
to $2,462.5 million from $2,066.5 million at the end of 2012.
Exiting the first quarter 2013, Embraer’s net cash used in
operating activities was $369.6 million versus $128.6 million in
the first quarter 2012. Capital spending increased to $50.4 million
in the quarter from $39.6 million in the year-ago quarter.
Guidance
The company maintained its 2013 revenues as well as margin
assumptions. Embraer, in February, had projected total revenue in
the range of $5.9 billion to $6.4 billion for 2013. It also expects
to deliver 90 to 95 commercial jets, 80 to 90 light executive jets
and 25 to 30 large executive jets this year.
The company also expects to realize an EBIT margin between 9.0% and
9.5% for the year.
Zacks Rank
Embraer currently has a Zacks Rank #3 (Hold). We would advise
investors to accumulate its Zacks Rank #2 (Buy) peers Wesco
Aircraft Holdings, Inc. (WAIR) and Triumph Group,
Inc. (TGI).
EMBRAER AIR-ADR (ERJ): Free Stock Analysis Report
TRIUMPH GRP INC (TGI): Free Stock Analysis Report
UNITED CONT HLD (UAL): Free Stock Analysis Report
WESCO AIRCRAFT (WAIR): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Wesco Aircraft (NYSE:WAIR)
Historical Stock Chart
From Jul 2024 to Jul 2024
Wesco Aircraft (NYSE:WAIR)
Historical Stock Chart
From Jul 2023 to Jul 2024