Zacks Investment Research downgraded shares of Embraer S.A. (ERJ) from NEUTRAL to UNDERPERFORM on January 15, 2013, with a target price of $25.00.
Embraer S.A. is expected to perform well in the future on the back of a few contract orders that it is likely to gain, including American and Continental regional jets order. However, the loss of the Delta Airlines contract in the current quarter has been detrimental to the future revenues of the company, leading to a downward estimate revision by most of the analysts. Moreover, 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. Embraer reported EPADS of $0.36 in 3Q12 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, the results also reflected a heavier tax burden, rising wages in Brazil, overt dependence on a few customers and a drop in demand for business jets. Based on the above factors, we downgrade our recommendation on the stock from Neutral to Underperform.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
To get a free copy of the research report on Embraer S.A. (ERJ),
click here.
For more information about research offerings from Zacks Investment Research, visit
Zacks.com .
Be the first to comment