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Morgan Stanley (NYSE:MS) raised its price target on Embraer (NYSE:ERJ) to $65 from $45 on Monday, while maintaining an Overweight rating on the Brazilian aerospace company’s stock. The new target represents potential upside from the current price of $48.29, with InvestingPro data showing the stock has already delivered an impressive 74% return over the past year.
The investment firm’s updated valuation removes a previous discount applied to Embraer relative to its peers, reflecting the market’s recent trend of valuing the company more in line with comparable aerospace manufacturers. With a market capitalization of $8.79 billion and a P/E ratio of 22.19, InvestingPro analysis indicates the stock is currently trading above its Fair Value.
Morgan Stanley’s new target is based on a blended sum-of-the-parts valuation that considers Embraer’s diverse business segments: Commercial Aviation, Executive Aviation, Defense & Security, and Services & Support.
The revised valuation methodology applies an approximately 11x multiple on Embraer’s projected 2027 EBITDA of about $1.1 billion, includes 50% of Eve’s market capitalization attributed to Embraer, and maintains a 10% Brazil country discount relative to peers in the United States, Europe, and Canada.
Morgan Stanley also cited improved long-term earnings visibility for Embraer as a key factor in its decision to increase earnings estimates and roll forward its valuation to 2027.
In other recent news, Embraer reported its first-quarter earnings, which fell short of analyst expectations. The company posted an adjusted loss of $0.02 per share, missing the breakeven estimate, with revenue reaching $1.1 billion, below the anticipated $1.19 billion. Despite this, revenue marked a 23% increase year-over-year, and Embraer reaffirmed its 2025 guidance, projecting revenue between $7.0 billion and $7.5 billion. The company expects to deliver 77 to 85 commercial aircraft and 145 to 155 executive jets this year. HSBC upgraded Embraer’s stock from Hold to Buy, highlighting a strong backlog of $26.4 billion at the end of the first quarter and improved delivery outlooks. The analysts believe this backlog will drive robust revenue generation in the coming quarters. Additionally, Embraer delivered 30 jets in Q1, a 20% increase compared to the same period last year, and improved its adjusted EBIT margin to 5.6%. The company’s net debt-to-EBITDA ratio also improved, reducing to 0.5x from 1.8x year-over-year.
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