Embraer S.A. ERJ recently announced a deal with Malaysia's SKS Airways for the supply of E195-E2 jets. Per the deal, the company will provide 10 E2 Jets to the airlines for $635 million.
The latest agreement allows Embraer to prosper in the Southeast Asian region with its impressive range of jets, thereby widening its footprint in the broader Asia Pacific region. Also, as the company enters the Malaysian territory, it opens avenues to book deals, like the latest one, with other airlines in the region and grow its customer base.
Per the report released by the International Air Transport Association (“IATA”) in March 2023, the recovery of global passenger traffic measured by Revenue Passenger Kilometers (“RPK”) has been strong, reaching 88% of the 2019 level.
The RPK can be expected to improve, considering the rise in travel demand for both domestic and international traveling. Per the data from IATA, domestic March 2023 traffic was at 98.9% of the March 2019 level, while international traffic climbed 68.9% compared to March 2022, with all markets witnessing significant growth.
As of Mar 31, 2023, Embraer’s E-Jets E2 had 281 orders in the backlog, reflecting a value of $17.4 billion. With the improvement across the global market, one may expect the company to witness orders for its jets, like the latest one, in the days ahead, which should boost its revenue generation prospects.
Opportunities for Peers
Apart from Embraer, aerospace majors — Airbus SE EADSY, Textron TXT and Boeing BA — enjoy an established position in the global commercial aerospace market and boast a significant order backlog.
Airbus boasts an order backlog of 7,254 commercial aircraft as of Mar 31, 2023 compared with the order backlog of 7,023 commercial aircraft as of Mar 31, 2022.
The Zacks Consensus Estimate for Airbus’ 2023 earnings has been revised upward by 3.3%. The Zacks Consensus Estimate for EADSY’s 2023 sales implies a growth rate of 18.5% from the prior-year reported figure.
Textron’s Textron Aviation business segment revenues increased 10.5% year over year to $1,149 million in the last reported quarter. The order backlog at the end of the quarter was $6.5 billion.
Textron boasts a long-term earnings growth rate of 11.2%. The Zacks Consensus Estimate for TXT’s 2023 earnings suggests a growth rate of 26.9% from the prior-year reported figure.
Boeing delivered 130 commercial planes during the quarter under review, up 37% year over year. The backlog for commercial airplanes remained healthy, with more than 4,500 airplanes valued at $334 billion.
Boeing boasts a long-term earnings growth rate of 4%. The Zacks Consensus Estimate for BA’s 2023 sales suggests a growth rate of 18% from the prior-year reported figure.
In the past year, shares of Embraer have rallied 38.1% against the industry’s decline of 6.3%.
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Embraer currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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