Bloomberg News

Embraer Headed to Best First Half Rally Since ’01 as Real Sinks

June 28, 2013

Embraer SA (EMBR3), the world’s top regional-jet maker, headed to the biggest first-half gain since 2001 as a plunging Brazilian currency and increasing orders boosted the outlook for profit growth.

The shares rose 0.9 percent today to 20.54 reais in Sao Paulo, extending this year’s advance to 42 percent. That’s the best first-half performance since a 45 percent gain in 2001. Embraer has been the best performer this year in Brazil’s Ibovespa benchmark, which has slumped 22 percent.

The Sao Jose dos Campos, Brazil-based planemaker received jet orders from companies including Japan Airlines Co., SkyWest Inc., Republic Airways Holdings Inc. (RJET:US) and the U.S. Air Force this year, and expanded a pact that lets Boeing Co. sell its military aircraft globally. The orders could help further improve the company’s backlog after a “light” 2012, according to Peter Skibitski, an analyst at Drexel Hamilton LLC.

“The regional jet market had been soft for a while, and there’s been a tremendous replacement demand that has come through to Embraer,” Skibitski said. “The U.S. market has certainly picked up for Embraer, and they have good growth prospects in all three of their core segments. I think that’s what has led to the great share performance this year.”

Embraer booked more than 365 firm orders and commitments for the so-called E2 versions of its E-Jets regional lineup, introduced this month at the Paris expo, the industry’s biggest trade event. The planemaker’s backlog totaled 211 planes and $13.3 billion on March 31, up from 185 aircrafts and $12.5 billion at the end of last year.

Real Plunge

The 8.7 percent plunge in the real in the second quarter has also helped Embraer, which drove up the local currency proceeds from the company’s dollar revenue. Embraer received about 86 percent of its revenue last year from outside Brazil, according to data compiled by Bloomberg.

The real is the worst performer among 24 emerging-market currencies tracked by Bloomberg in the second quarter. The currency is poised for its biggest loss since the second quarter of 2012 as stagnant economic growth, violent street protests and speculation the Federal Reserve will curtail U.S. monetary stimulus eroded demand for Brazilian assets.

To contact the reporter on this story: Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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    (Republic Airways Holdings Inc)
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