Rating Change #3
Embraer S.A. (ERJ) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.
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Highlights from the ratings report include:
- EMBRAER SA reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, EMBRAER SA increased its bottom line by earning $1.92 versus $0.61 in the prior year. This year, the market expects an improvement in earnings ($2.70 versus $1.92).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Aerospace & Defense industry. The net income increased by 234.2% when compared to the same quarter one year prior, rising from -$91.80 million to $123.20 million.
- The debt-to-equity ratio is somewhat low, currently at 0.76, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.05, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has significantly increased by 194.28% to $525.00 million when compared to the same quarter last year. In addition, EMBRAER SA has also vastly surpassed the industry average cash flow growth rate of -10.83%.
- ERJ, with its decline in revenue, underperformed when compared the industry average of 6.5%. Since the same quarter one year prior, revenues slightly dropped by 6.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
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