Embraer SA (ERJ), the Brazilian jet maker, delivered 82 jets in the fourth quarter 2014, down 3.5% from 85 deliveries in the year-ago quarter. However, fourth quarter deliveries increased significantly from 34 deliveries in the preceding quarter.
Deliveries in the commercial aviation and business aviation markets were 30 and 52 jets, respectively. Embraer delivered 22 E-175s, 5 E-190s and 3 E-195s to the commercial aviation market, while the rest were delivered to the business aviation market, which included 38 Light jets and 14 Large jets.
Full year 2014 numbers at 208 deliveries were almost on par with the 209 jets delivered in 2013. The company delivered 92 airplanes to the airline market and 116 to executive aviation in 2014.
Embraer reported an order backlog of $20.9 billion as of Dec 31, 2014. In terms of aircraft breakdown, the company’s order backlog comprises 172 E-175s, 100 E-175-E2s, 65 E-190s, 60 E-190-E2s, 50 E-195-E2s, 7 E-195s and 5 E-170 jets.
During the fourth quarter, 2014, NetJets Inc., a Berkshire Hathaway Inc. (BRK.B) company, converted purchase options for 10 Signature Series Phenom 300 into firm orders. The company also received a firm order from SkyWest Inc. (SKYW), the holding company of SkyWest Airlines and ExpressJet Airlines, for its E175 jets.
Embraer operates in a highly competitive commercial aircraft manufacturing industry, dominated by The Boeing Co. (BA) and Airbus, with longer operating histories and established reputations. This requires Embraer to invest steadily in technology and performance enhancement to keep up with the growing demand in the commercial aircraft manufacturing market.
Despite its bulging order book, we remain concerned about the highly competitive industry that is compelling Embraer to incur higher costs. Moreover, the possibility of order cancellations and a drop in demand for business jets add to its woes.
Embraer currently has a Zacks Rank #4 (Sell).
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