Embraer lags in orders at Paris Airshow, but longer-term recovery seen

Eve Holding

27/06/2023 16:05

By Gabriel Araujo
       SAO PAULO, June 27 (Reuters) - Investors were left
disappointed by weaker-than-expected order numbers for Brazil's
Embraer  EMBR3.SA  at the world's largest air show last week,
although some analysts were heartened by a bid from China and
interest in its electric aircraft unit. 
    The world's third-largest aircraft maker after Airbus
 AIR.PA  and Boeing  BA.N , Embraer bagged 13 fresh orders for
commercial jets at the Paris Airshow, falling short of market
estimates and previous years' levels.
    That led shares in the company to slip roughly 18% in a
week, reversing the 11% gain seen in the days ahead of the show,
when market players seemed excited by the prospects of new
deals.
    "Embraer's commercial activity was not strong enough to meet
investors' expectations," said analysts at XP Investimentos, who
remain Buy-rated on the company on growth prospects and
attractive valuation.
    The 13 new orders compared to 74 secured at Le Bourget in
2019 and 28 in Farnborough last year. They also lagged some
upbeat market forecasts, which included at least 30 orders
expected by JPMorgan analysts.
    Investors were especially disappointed by the lack of orders
from the booming Indian airline market, which handled an
all-time high 500-plane transaction to Airbus and new orders to
Boeing.
    "Given the significant announcements from Airbus, it's
possible that Embraer shareholders feel frustrated," noted BTG
Pactual analysts, who also have a "buy" recommendation for
shares in the planemaker.
    
    SLOW BUT LUCRATIVE
    Still, a number of analysts remain bullish on the Brazilian
company as a post-pandemic travel rebound continues to drive
money inflow in the sector.
    BTG said it was important to note the sales to existing
clients Binter and American Airlines  AAL.O  were equivalent to
19% of Embraer's outlook of 65-70 deliveries this year, making
them "significant deals".
    Those orders add to a backlog that remains robust, with the
E2 aircraft seen as largely sold out for this year and 2024
after garnering new customers such as Royal Jordanian, Salam Air
and Scoot recently.
    Despite the overall slow pace of deals at the air show,
investment research firm Zacks still touted them as "lucrative"
and "highlighting the reliability and efficiency this jetliner
offers". 
    Other upbeat takes from the air show came from electric
aircraft subsidiary Eve  EVEX.N , which signed deals for the
sale of up to 150 flying cars, as well as Embraer's deal to
return to China by converting passenger jets into freighters.
    Shares in Embraer are still up 20% so far this year, and
some analysts believe upside remains.
    "We believe that most of the pre-event excitement has
already been adjusted in share prices," XP said. "There is
limited room for further pressure."

 (Reporting by Gabriel Araujo; Editing by Conor Humphries)
 ((Gabriel.Araujo2@thomsonreuters.com; +55 11 5047-3352;))