Embraer SA Beats on Q1 Earnings - Analyst Blog

Embraer SA's ERJ first-quarter 2014 earnings of 34 cents per American Depository Shares ADS spiked 78.9% from 19 cents per ADS in the prior-year quarter. The reported figure also beat the Zacks Consensus Estimate of 22 cents by 54.5%.

The better-than- expected result was attributable to the strong defense and executive jet deliveries.

Total revenue

Net revenue was $1,242.3 million, up 14.4% from $1,085.9 million in the year-ago quarter and ahead of the Zacks Consensus Estimate of $1,144.0 million by 8.6%. The improved result was driven by strong outcome from both the Defense & Security and Executive Jets segments. In addition, the company's continuous effort to diversify its business beyond its commercial dealings also boosted the top line.

Order and Delivery

In first quarter 2014, the plane manufacturer delivered a total of 34 jets, higher than 20 deliveries made in the prior-year quarter.

Of the total deliveries, 14 jets were made for the commercial aviation market including 8 E-175, 4 E-190, 1 E-195 and 1 E-170. The remaining 20 jets, inclusive of 17 light and 3 large ones were delivered to the executive aviation market.

Embraer's firm order backlog totaled $19.2 billion, reflecting a quarter-over-quarter increase of 5.5% and year-over-year increase of 44.4%. Embraer's order backlog comprised 180 E-175, 100 E-175-E2, 68 E-190, 50 E-195-E2, 50 E-190-E2 and 16 E-195.

Segment Details

Commercial Aviation revenues, comprising 44.7% of total quarterly revenue, fell 13.2% year over year to $555.3 million.

Executive Jets revenues, representing 21.5% of total quarterly revenue, surged 52.5% year over year to $267.4 million.

Defense & Security generated revenues of $394.3 million that accounted for 31.8% of total first quarter sales and increased 56.7% from the year-ago period.

The Other category accounted for 2.0% of total first quarter revenue, rising almost 31.1% year over year to $25.3 million.

Financial Update

Cash and cash equivalents were $1,259.5 million as of Mar 31, 2014, compared with $1,683.7 million as of Dec 31, 2013.

As of Mar 31, 2013, the company's total debt was $2,217.8 million, up from $2,194.3 million as of Dec 31, 2013.

In the first quarter 2014, Embraer's net cash used in operating activities was $300.4 million versus $369.7 million in first quarter 2013.

Capital expenditure was $47.6 million, down from $50.4 million in the first quarter 2013.

Guidance

In its previous guidance, Embraer projected 2014 total revenue in the range of $6.0 billion to $6.5 billion. Embraer expects 2014 revenues to increase slightly from 2013 levels on the back of its Defense & Security and Executive Jets segments.

In its earlier guidance the company expected EBIT margin in the range of 9.0%−9.5% for 2014.

In addition, the company has also maintained its prior investment guidance of around $0.7 billion for 2014. This expenditure comprises $0.08 billion of research, $0.3 billion of product development and $0.2 billion of capital expenditure.

Other Releases

Lockheed Martin Corp. LMT announced first quarter 2014 earnings of $2.87 per share, surpassing the Zacks Consensus Estimate of $2.52 by 13.9%.

Boeing Co. BA reported first quarter 2014 adjusted earnings of $1.76 per share, beating the Zacks Consensus Estimate of $1.54 by 14.3%.

Another defense major, General Dynamics Corp. GD reported first quarter 2014 earnings of $1.71 per share, surpassing the Zacks Consensus Estimate by 4.9%.

Our Take

In the first quarter 2014, the company's firm order backlog reached its highest level since the second quarter of 2009, mainly due to orders in the Commercial Aviation segment. We expect this will help the company to generate considerable amount of revenue in the future.