October 24, 2012
Embraer is ramping up for another busy fourth quarter, when the company expects to nearly match the number of executive jets deliveries and revenues brought in through the first three quarters combined.
During the third quarter, Embraer delivered 13 business jets, including 11 Phenoms and two of its large business jets – slightly fewer than analyst expectations. J.P.Morgan’s Joseph Nadol notes original estimates were for 19 Phenoms and three of the large business jets, but says Embraer is expected to cover the shortfall in the fourth quarter.
For the year, Embraer has delivered 40 light and six large executive jets, and Embraer President and CEO Frederico Curado told analysts today (Oct. 24) the company still expects to meet its guidance of deliveries of 15-20 large executive jets and 75-85 Phenoms for the year. “I think we’re going to get there.”
Nadol says this likely would be at the lower end of the guidance – which would keep deliveries down slightly from 2011. But like this year, 2011 deliveries were also heavily back-loaded, with 50% of the shipments coming in the fourth quarter.
Embraer’s executive jets unit has taken in $580 million in revenues for the first three quarters of the year, but the company estimates that the unit will bring in $1.1 billion-$1.3 billion for the year. While the executive jets unit accounted for only 14% of overall company revenues through the first nine months, a last-quarter flurry of deliveries is expected to increase that to approximately 20%, about the equivalent of last year.
Embraer backlog overall declined slightly in the quarter to $12.4 billion, down from $12.9 billion at the end of the second quarter, and $14.7 billion at the end of the first. But the most recent slide primarily stemmed from the commercial side. Embraer executives did see some improvement in executive jet sales in the third quarter, and given a slower level of deliveries in the third quarter, had a book-to-bill greater than one.
Embraer executives have not given their formal 2013 guidance, but Ernest Edwards, president of Embraer Executive Jets, told reporters earlier this month that he does not see substantial market upturn in the short-term.
Company executives also recently indicated to analysts they expect flat deliveries in 2013, Nadol says, prompting J.P. Morgan to scale back its business jet forecast for the Brazilian manufacturer next year to an estimated 96 deliveries. This is down from the original estimate of more than 100 deliveries, and but still up from what is expected this year.
Also helping to fuel that caution is that Embraer competitor Cessna had noted that it is expecting deliveries to remain flat in 2013, Nadol notes.