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Why Embrarer (ERJ) Stock Is Flying High Today

NEW YORK (TheStreet) -- Shares of Embraer SA  (ERJ) are jumping 3.42% to $39.59 on Monday after the Brazilian plane maker announced booking its strongest commercial deliveries in two years, Reuters reports.

At the Farnborough International Airshow in England, U.S. regional operator Trans States Holdings ordered 50 of Embraer's next-generation E-175 aircraft for delivery beginning in 2020, with options for 50 more jets, worth $2.4 billion at list prices, according to the news agency.

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Separately, TheStreet Ratings team rates EMBRAER SA as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate EMBRAER SA (ERJ) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and compelling growth in net income. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 3.2%. Since the same quarter one year prior, revenues rose by 14.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to -$300.40 million or 18.72% when compared to the same quarter last year. Despite an increase in cash flow, EMBRAER SA's cash flow growth rate is still lower than the industry average growth rate of 44.04%.
  • In its most recent trading session, ERJ has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • The gross profit margin for EMBRAER SA is currently lower than what is desirable, coming in at 26.39%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 8.90% is above that of the industry average.
  • You can view the full analysis from the report here: ERJ Ratings Report
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