Embraer Rises Most in 7 Weeks as Brazil Earnings Bright Spot

  • Deliveries included 21 commercial planes, 30 business jets
  • Planemaker is developing a new generation of jetliners

Embraer SA rose the most in seven weeks after delivering more aircraft last quarter and reaffirming its financial targets as the Brazilian planemaker develops a new generation of regional jetliners.

The 21 commercial planes and 30 business jets handed over to buyers in the third quarter topped the tally of 34 from a year earlier, the Sao Jose dos Campos, Brazil-based Ecompany said in its earnings report Tuesday.

Embraer’s results marked a bright spot for Brazil, which is enduring its longest recession since the Great Depression, inflation and the highest interest rates since 2006. Embraer shares climbed 4.8 percent, the most since Sept. 2, to close at 27.85 reais. The rally bucked a decline in Brazil’s benchmark Ibovespa index, which slid 0.4 percent.

Embraer shares have gained 14 percent this year.

Cash consumption will be $100 million for the full year as forecast, Embraer executives said on a conference call. Keeping development costs under control is crucial for aircraft manufacturers, because building a new model -- or even an update of an existing plane -- can take years. Embraer is refreshing its signature E-Jet line with the so-called E2 family featuring upgraded engines. The first one is set to debut in 2018.

“They’re doing well pushing the E2s and you can see the focus of their sales force being successfully transferred to the next generation,” said Nicholas Heymann, research analyst at William Blair & Co. in New York. He rates Embraer’s American depositary receipts as “market perform.”

While in the long term a strong dollar is positive for Embraer, the magnitude of the real’s third-quarter drop had a one-time impact on costs, Chief Financial Officer Jose Antonio de Almeida Filippo said on the call. The real tumbled 21 percent against the dollar in the period, according to data compiled by Bloomberg. Aircraft sales worldwide are typically priced in dollars.

Sales of 4.58 billion reais ($1.17 billion) trailed the median estimate of 5.36 billion reais in an analyst survey compiled by Bloomberg. The loss attributable to shareholders widened to 387.7 million reais from 24.3 million reais a year earlier as the company was hit by rising tax payments. The devaluation created a tax expense of $164.4 million, up from $77.1 million a year earlier.

Executives reaffirmed their delivery and financial forecasts for 2015.

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