Embraer (EMBR3) stock is open to 8% lower after balance

Embraer stock (EMBR3) sharply opened down, after the release of Balance sheet for the fourth quarterwhich showed a gain of R$11.1 million in the unadjusted result, reversing a loss of R$7.7 million in the same period in 2020.

At 11:05 AM, the shares were down 8.37%, at R$15.11, topping the losses. The negative performance of the stocks came even as analysts believed the results went from neutral to positive, with a particular focus on cash generation.

However, Embraer shares follow the general downturn in the aviation sector, with shares of Gol (ghoul 4(Decreased by 6.6% and Azul)blue 4) is down 5.2% on account of the new rise in oil prices this morning.

Embraer’s strong quarter

For Bradesco BBI, Embraer had a “strong quarter, with guidance 2022, which confirms the positive outlook.

Bradesco BBI highlights $453 million in free cash generation in Q421, ending the year with positive cash generation of $292 million and overtaking guidance Until 2021 from >100 million USD. The strong performance came with 29% fewer aircraft deliveries compared to 2019 (pre-pandemic) levels, indicating that Embraer’s new C-Level team was able to transform the company with a lower agile cost structure and capital funding.

For BBI analysts, Embraer’s stock price could rise 55% with market prices at Eve’s $2.9 billion valuation and the company’s strong operating performance. Thus, they maintain Embraer’s superior performance rating, and a target price of $26.00.

weaker steering

XP has evaluated Embraer reporting solid cash-generating performance, but guidance For 2022 is weaker than expected.

XP analysts estimate that Embraer reported neutral results in the fourth quarter of 21, with Ebitda below estimates, which was explained primarily by the $43 million impact of the recent agreement with the Brazilian Air Force (accounting effect). Non-cash on numbers 4Q21).

But they emphasize strong cash flow performance, with free cash flow of $452 million in Q421 resulting in annual cash flow of $292 million, well above the company’s previous indications of about $100 million (supporting a leveraged cut to reach 3.5x net debt/EBITDA versus 5.6x in 2019), as well as the strong profitability performance of the Aircraft and Executive Services divisions.

Embraer Earnings Conference

During a conference call with analysts, Embraer (EMBR3) CEO Francisco Gomez Neto said the company has complied with international economic sanctions applied against Russia in response to the invasion of Ukraine.

On Wednesday (9), Embraer suspended the supply of spare parts, maintenance and technical support to Russia, Belarus and the regions of Ukraine “in compliance with the sanctions imposed by the laws of jurisdictions”. However, he is of the view that the conflict “should not lead to material disruptions in the medium term.”

Impact on projections

Embraer (EMBR3) highlighted that the geopolitical scenario still had little impact on the outlook (directions) for 2022. According to Antonio Carlos Garcia, the company’s vice president and chief financial officer, there are greater supply chain concerns since the last quarter of last year.

The CEO continues: “We are seeing a kind of dysfunction, especially the lack of materials and qualified labor. We understand that it is a risk scenario, and we think it should be improved.”

The forecast for 2022 disclosed by Embraer in its 2021 earnings report is for the delivery of 60 to 70 commercial aircraft; delivery of executive aircraft from 100 to 110 aircraft; net income between US$4.5 billion to US$5 billion; Adjusted Ebit margin from 3.5% to 4.5%; Adjusted Ebitda margin from 8.0% to 9.0%; and free cash flows of $50 million or more per year.

missing pieces

Antonio Carlos Garcia added that the situation today has very limited flexibility and is independent of the flight model that will be produced. “There are so many parts missing today,” according to the CEO, that suppliers are asking, “What part do you need the most right now? You can’t have it all. It’s in the dropper.”

According to him, this is not only with Embraer. “Because we are smaller than Boeing and Airbus, they may have a harder time than us. The challenge is to deliver what is in the steering,” he says.

In terms of suppliers, the company is “working hard on this, but the scenario is not favorable,” said Francisco Gomez Neto, CEO of Embraer (EMBR3).

pandemic

According to Francisco Gomez Neto, CEO of Embraer (EMBR3), the company has been noticing an increase in the number of passengers due to reduced damping caused by the pandemic.

Now there are three effects that could complicate matters: increased fuel, as tickets increased, affecting demand; He told analysts on Thursday (10) by phone that the war itself, with flight restrictions and a slight shortage of pilots, would be resolved in the medium term.

This scenario, he says, affects long-haul flights more than domestic flights.

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