Zacks Investment Research upgraded shares of Embraer S.A. (ERJ) from UNDERPERFORM to NEUTRAL on February 11, 2013, with a target price of $35.00.
We have upgraded Embraer S.A. from Underperform to Neutral recommendation. The company is expected to perform well in the future on the back of a few contract orders that the company is likely to gain, including the American and Continental regional jets order. Also, the introduction of new jets along with an upgradation of the existing ones makes us hopeful of increasing revenues. Embraer reported EPADS of $0.36 in 3Q12. It is a significant increase from EPADS of $0.01 in the year-ago quarter. Contribution from the defense segment coupled with the effect of depreciation of real against dollars in the production cycle led to the improvement in the results. However, Embraer's earnings demonstrated a heavier tax burden, rising wages in Brazil, overt dependence on a few customers and a drop in demand for business jets. The highly competitive industry in which the company operates is forcing Embraer to incur high costs with an increase in the prices of fuel along with the possibility of order cancellations. The loss of a major contract in the quarter to a rival also raises our concern on the stock.
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