HSBC has upgraded its rating on Brazilian aircraft manufacturer Embraer from "hold" to "buy", stating that a record order backlog, improved production and increasing momentum in business aircraft and defense deliveries support a positive earnings performance this year.
The brokerage raised its price target from $45 to $57, citing a higher valuation of Embraer's eVTOL unit EVE and a lower discount rate in its cash flow model.
The new target implies an upside potential of 24% from current levels.
"With a historic order backlog of $26.4 billion at the end of the first quarter, Embraer can deliver strong revenues in the coming quarters. This will be supported by increased efforts to eliminate production bottlenecks and a more even distribution of production across quarters," HSBC wrote.
The company expects a robust performance in the second quarter with nine aircraft already delivered, which is almost 20% of deliveries in the second quarter last year.
HSBC forecasts a 28% year-on-year increase in business aircraft deliveries in the first quarter of 2025 and sees stable demand in the defense sector, particularly for the KC-390 and A-29 aircraft.
The bank also cited the upcoming Paris Air Show as a potential source of new orders.
The impact of the new US tariffs of 10% on Brazilian imports is likely to be limited, the bank estimated, and expects EBIT margins in the Executive and Services segments to decline by around 90 basis points. Embraer intends to compensate for this through cost reductions and an increased US share, it noted.
Commercial aviation is not affected by this and the margin forecast for 2025 remains unchanged.
HSBC maintained its revenue guidance of $7.5 billion for 2025, which is the upper end of the company's guidance, and forecast a consolidated adjusted EBIT margin of 7.9%. The company is now valued at an EV/EBITDA ratio of 10.8x for 2025 and 8.1x for 2026, compared to a five-year average of 8.7x.
A successful flight test of the first full-scale EVE prototype, planned for mid-2025, could serve as an important catalyst, the company added.
Bermudair expands with third Embraer E190
06.06.25 - 15:17
Editorial
The airline from Bermuda has added its third Embraer E190 to the fleet. It has been named after a close companion, Niel Jones, and bears the registration VQ-BLZ. According to Bermudair, the additional jet will strengthen operational reliability and flexibility. A fourth aircraft is to follow in June.
The fleet expansion will support the introduction of new routes to Providence, Richmond and Montreal, Bermudair added.
https://www.aerotelegraph.com/ticker/bermudair-baut-mit-dritter-embraer-e190-aus/8l22x0k
