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On Wednesday, HSBC analysts raised Embraer stock (NYSE: ERJ) from Hold to Buy, citing a robust backlog and promising delivery projections. The price target was increased to $57 from $45, falling within the broader analyst range of $39-$64. The stock has already demonstrated strong momentum, delivering a 60.8% return over the past year.
The analysts highlighted Embraer’s all-time high backlog of $26.4 billion at the end of the first quarter as a key factor in the upgrade. This backlog is expected to drive strong revenue generation in the upcoming quarters, building on the company’s impressive 39.3% revenue growth over the last twelve months. The company is making efforts to address production bottlenecks and plans to spread production more evenly throughout the year. According to InvestingPro, Embraer maintains a "GREAT" overall financial health score of 3.12, suggesting strong operational execution.
Embraer is projected to see significant growth in deliveries for 2025, particularly in executive jets and defense products like the KC-390 and A-29 Super Tucanos. The company has nine aircraft ready for sale, representing 20% of last year’s second-quarter deliveries.
The upcoming Paris Air Show in mid-June could present new opportunities for firm orders. Additionally, EVE, Embraer’s urban air mobility subsidiary, is approaching a critical milestone with its first full-scale prototype flight test scheduled for mid-2025, which could act as a positive catalyst if successful.
In other recent news, Embraer reported first-quarter earnings that did not meet analyst expectations, posting an adjusted loss of $0.02 per share against a breakeven estimate. The company’s revenue for the quarter was $1.1 billion, which fell short of the consensus estimate of $1.19 billion but represented a 23% increase year-over-year. Despite the earnings miss, Embraer reaffirmed its 2025 guidance, projecting revenue between $7.0 billion and $7.5 billion, aligning closely with the analyst consensus of $7.39 billion. The company plans to deliver 77 to 85 commercial aircraft and 145 to 155 executive jets for the year.
Embraer highlighted a 72% year-over-year growth in its Defense & Security segment, contributing to its best first-quarter revenue since 2016. The company delivered 30 jets in the first quarter, a 20% increase from the previous year. Its firm order backlog reached $26.4 billion, surpassing the previous quarter’s record. Additionally, Embraer improved its adjusted EBIT margin to 5.6%, up from 0.8% in the same period last year, and strengthened its financial position by reducing its net debt-to-EBITDA ratio to 0.5x from 1.8x year-over-year.
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