Embraer Rallies as Brazilian Currency Weakens: Sao Paulo Mover

Embraer SA (EMBR3), the Brazilian planemaker that has led gains on the Ibovespa (IBOV) equity benchmark in 2013, rose to a five-year high on speculation a weaker real will help boost revenue.

The shares gained 2.2 percent to 19.41 reais at 1:45 p.m. in Sao Paulo after earlier rising as much as 4.8% to the highest price since February 2008. The Ibovespa declined 1.4 percent. The real fell 1.4 percent to 2.1399 per dollar, the lowest since May 2009, after Brazil’s central bank unexpectedly stepped up the pace of increases in the benchmark interest rate.

Because almost all of Embraer’s revenue is denominated in dollars, it should benefit more than most Brazilian companies from the currency’s decline, according to Pedro Galdi, the chief strategist at Sao Paulo-based brokerage SLW Corretora. “If this scenario is favorable to someone, it’s to exporters,” he said in a phone interview.

The central bank’s board voted unanimously on May 29 to raise the target lending rate by a half-percentage point to 8 percent, surprising 38 of 57 economists surveyed by Bloomberg who had forecast a second straight increase of 25 basis points.

Embraer has surged 35 percent this year after announcing an agreement to sell jets worth as much as $8.3 billion in jets to SkyWest Inc., an order of as much as $4 billion from Republic Airways Holdings Inc. (RJET) and a $950 million contract with the U.S. Air Force.

The planemaker’s revenue rose 23 percent to 12.2 billion reais in 2012 from 2011, data compiled by Bloomberg show. Of that, 97 percent came from sales to other countries, according to information posted on the company’s website.

To contact the reporter on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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