Embraer S.A. ERJ recently received an order from Air Peace, a Nigeria-based airline company, to deliver five E175 jets worth $288.3 million. This order is expected to contribute to Embraer’s revenue growth, starting in 2024 when the deliveries commence.
Air Peace, the largest airline in West Africa, is upgrading its fleet from the 50-seater ERJ145 to the 88-seater E175. This may lead to more aircraft orders from Air Peace in the future, further boosting Embraer’s order book and revenues.
Growth Prospects of Embraer
The commercial aerospace industry has experienced steady growth in air passenger traffic in recent months, recovering from the impact of the pandemic. The easing of travel restrictions in China has also contributed to the industry’s recovery.
According to a report by the International Air Transport Association, global passenger traffic, measured by Revenue Passenger Kilometers (RPK), has reached 95.6% of the 2019 level. This strong recovery in global passenger traffic bodes well for commercial aircraft manufacturers like Embraer.
In the second quarter, Embraer delivered 47 E-jets, representing a 47% increase compared to the same period last year. The company continues to see strong demand for its E-jets worldwide.
The positive trends in the commercial aerospace industry are expected to continue, with a projected 20% increase in global RPKs in 2023. These favorable conditions in the air travel business will contribute to the growth of Embraer’s commercial aviation business and overall revenue generation.
Peers to Gain
Apart from Embraer, other aircraft manufacturers in the industry that are likely to benefit from the strong demand for aircraft include:
Airbus EADSY: Airbus delivered 189 commercial aircraft in the second quarter, representing a year-over-year growth of 21.9%. The company expects to deliver 720 commercial aircraft in 2023. Airbus has a long-term earnings growth rate of 12.4%.
Boeing BA: Boeing remains the largest aircraft manufacturer in the United States in terms of revenues, orders, and deliveries. The strong demand for its commercial planes is evident from the 41% year-over-year increase in revenues in the Commercial segment. Boeing has a long-term earnings growth rate of 4%.
Price Movement
In the past year, Embraer’s stock has gained 40.9%, outperforming the overall industry’s decline of 8.1%.
Image Source: Zacks Investment Research
Zacks Rank & a Key Pick
Embraer currently holds a Zacks Rank #3 (Hold). Another stock in the same industry with a better rank is Textron TXT, which holds a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for Textron’s 2023 sales suggests a growth rate of 7.7% from the previous year.
TXT has a long-term earnings growth rate of 11.7%. In the past year, Textron’s stock has risen 18.9%.
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