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$18.28 0.15 (0.83%)
1/9/2009 4:01 PM

Embraer-Empresa Brasileir de Aero (ADR) (ERJ)

CAPS Rating:
*****

Produces aircraft for commercial, corporate and defense purposes. The Company has obtained, developed and enhanced its engineering and technological capabilities through its own development of products and joint product development with foreign companies.

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Avatar NetscribeDefense (75.01) Submitted: 2/20/07 7:20 AM : Outperform Start Price: $44.62 ERJ Score: -20.24

Embraer-Empresa Brasileira de Aeronautica S.A. is a Brazilian company that manufactures aircrafts for commercial, business jet, and defense purposes. It operates in four segments: Commercial Aviation, Defense and Government, Executive Aviation, and Customer Services and Others. It serves operators in 65 countries across 5 continents.

Embraer ended 2006 with a backlog of $14.8 billion which is a new record for the company. Revenues in the first nine months of 2006 have also increased slightly by 3.2% and the company also has a good cash position of $1.2 billion at the end of September.

The aviation industry has a good future as analysts suggest that higher oil prices will result in an increase in demand for fuel efficient aircrafts. Additionally the Indian and Chinese markets have opened up and around 36 percent of the overall industry sales are expected to come from these two markets. India is expected to spend 7 billion annually on aviation for the next ten years. Embraer has also entered the $15 billion executive aviation market which has very high margins. This market is expected to reach $144 billion over the next ten years. China is touted to be a huge market for executive aviation jets and Embraer has already set up a plant in the northeastern city of Harbin. Embraer has launched the Phenom 100 and Phenom 300 jets to further penetrate into the executive aviation market.

Embraer has received a plethora of orders in 4Q’06 from Virgin Blue Airlines, Wondair, Eagle Creek and Avantair and expects to deliver around 165 to 170 aircrafts in 2007 and 195 in 2008, which is why it will have an excellent flight in 2007.

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Avatar NetscribeDefense (75.01) Submitted: 5/29/07 8:15 AM

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Embraer has received the patronage and sponsorship from the Brazilian government, banks over the years. With its counterparts Boeing and Airbus moving out of the regional jet market the company has placed itself at a formidable position. Order backlog looks rock solid at $14.8 billion that has grown by 40%.

Revenues of the company are skewed towards commercial airline segment accounting for around three fourth of the pie. Significant progress has been made in the business jet market with the development of Phenom 100 and Phenom 300 for which it has received order in the range of 400 units. Decision to sell its commercial or executive jets – ERJ 170 and ERJ 190 to governmental organizations around the world has proved successful. The sale of 50 ERJ 145 and ERJ 190 to HNA group has proved the strategy to target Chinese airline market right, proving to be a good moral booster.

Huge resources have been put into research and development that are fixed in nature and profitability is expected to rise in the coming years. The company has its own cause of concern and has to fix the problem with the wing assemblies that are sourced from other suppliers to bring delivery problems under control. Of late it has beefed up its service operations for which it has expanded the Nashville facility to maintain, repair and overhaul the aircrafts with about 35 of them throughout the world.

The company’s cash flows generated to the tune of $429 million would makeup for debt it carries and also supported by EBITDA covering the interest expense by more than five times. As part of its financing strategy it has opted for a $500 million syndicated standby credit facility that would help it enhance liquidity. Summarizing the above mentioned the stock looks all set for another positive year.

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