NEW YORK ( TheStreet) -- Embraer (NYSE: ERJ) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 0.8%. Since the same quarter one year prior, revenues rose by 30.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 519.79% to $161.20 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 -30.08%.
  • The debt-to-equity ratio is somewhat low, currently at 0.73, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.79 is somewhat weak and could be cause for future problems.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Aerospace & Defense industry. The net income has significantly decreased by 98.1% when compared to the same quarter one year ago, falling from $98.50 million to $1.90 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Aerospace & Defense industry and the overall market, EMBRAER SA's return on equity is significantly below that of the industry average and is below that of the S&P 500.

Embraer S.A. engages in the development, production, and sale of jet and turboprop aircraft for civil and defense aviation markets. The company has a P/E ratio of 14.8, equal to the average aerospace/defense industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Embraer has a market cap of $5 billion and is part of the industrial goods sector and aerospace/defense industry. Shares are down 8.3% year to date as of the close of trading on Tuesday.

You can view the full Embraer Ratings Report or get investment ideas from our investment research center.
null

If you liked this article you might like

There's Still Time to Buy These 5 Breakout Trades

Spirit CEO Hails Aircraft Maker Competition, Will Look at Bombardier CS-100

Bullish and Bearish Reversals for the Week

These 5 Stocks Are Breaking Out

Embraer (ERJ) Weak On High Volume Today