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Embraer (ERJ) Q1 Earnings Top Estimates, Revenues Fall Y/Y

Embraer SA ERJ incurred first-quarter 2020 adjusted loss of 57 cents per American Depository share (ADS), narrower than the Zacks Consensus Estimate of a loss of 67 cents but wider than the year-ago quarter loss of 34 cents.

The year-over-year deterioration can be attributed to decline in operating income along with higher foreign exchange losses owing to the substantial appreciation of the U.S. dollar versus the Brazilian real.

Including one-time items, the company incurred a GAAP loss of $1.59 per share compared with loss of 23 cents in the year-ago quarter.

Revenues

Embraer’s first-quarter revenues came in at $633.8 million, down 23% year over year. The decline was due to lower revenues in each of the company’s segments, except for the Executive Jets segment.

EmbraerEmpresa Brasileira de Aeronautica Price, Consensus and EPS Surprise

EmbraerEmpresa Brasileira de Aeronautica Price, Consensus and EPS Surprise
EmbraerEmpresa Brasileira de Aeronautica Price, Consensus and EPS Surprise

EmbraerEmpresa Brasileira de Aeronautica price-consensus-eps-surprise-chart | EmbraerEmpresa Brasileira de Aeronautica Quote

Order and Delivery

Embraer delivered 14 jets in the reported quarter, down 36.4% year over year. The company delivered five commercial and nine executive (five light and four large) jets compared with 11 commercial and 11 executive (eight light and three large) jets in the year-ago quarter.

Backlog at the end of the quarter was $15.9 billion compared with $16.8 billion in the prior quarter.

Operational Highlight

In the first quarter, the company’s cost of sales and services totaled $449.8 million, down from $649.4 million in the prior-year quarter.

Consequently, Embraer’s gross profit grew 12.3% to $184 million.

It posted quarterly adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $64.9 million compared with $30.9 million in the year-earlier quarter.

Financial Update

As of Mar 31, 2020, the company’s cash and cash equivalents amounted to $2,394.4 million compared with $2,307.7 million as of Dec 31, 2019.

Embraer had net debt of $1,332 million as of Mar 31, 2020, up from $612.4 million as of Dec 31, 2019.

Adjusted net cash used in operating activities was $593.3 million at the end of first-quarter 2020 compared with $557.5 million at first-quarter 2019 end.

The company’s adjusted free cash outflow at the end of the first quarter was $676.5 million compared with free cash outflow of $665.3 million at the end of 2019’s first quarter. The downside was on account of lower net income in the current period and additional investment in working capital.

Guidance

Due to the uncertainty related to the impact of the spread of COVID-19, Embraer has kept its 2020 guidance suspended for the time being.

Zacks Rank

Embraer currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Q1 Defense Releases

Lockheed Martin Corp. LMT, a Zacks Rank #3 company, reported first-quarter 2020 earnings of $6.08 per share, which surpassed the Zacks Consensus Estimate of $5.76 by 5.5%. The bottom line also improved 1.5% from the year-ago quarter’s $5.99.

General Dynamics Corporation GD, a Zacks Rank #3 company, reported first-quarter 2020 earnings from continuing operations of $2.43 per share, which missed the Zacks Consensus Estimate of $2.46 by 1.2%. Moreover, earnings declined 5.1% from $2.56 in the year-ago quarter.

L3Harris Technologies LHX, another Zacks Rank #3 company, posted first-quarter 2020 adjusted earnings of $2.80 per share, which surpassed the Zacks Consensus Estimate of $2.61 by 7.3%. The bottom line also increased 20.7% from the year-ago quarter’s $2.32.

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