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Embraer Jet Deliveries Up From First Quarter

July 18, 2011
'Order flow was again the bright spot,' Morgan Stanley Research concludes.

Embraer reported that it delivered 25 commercial jets and 23 executive jets in second-quarter 2011.

Deliveries rose from 20 commercial jets and eight executive jets in the first quarter.

As of June 30, the Brazil-based jet manufacturer had a firm-order backlog of $15.8 billion.

Embraer's commercial-jet deliveries were in line with Morgan Stanley Research's expectations, while the company's executive-jet deliveries fell short of Morgan Stanley's estimate of 29.

Still, the research firm said the soft delivery numbers are offset by some momentum in Embraer's orders.

Of the 25 commercial jets that Embraer delivered in the second quarter, 17 were Embraer 190s.
"Though the official backlog slipped to $15.8 billion (from $16 billion last quarter), it does not yet include the sale of an additional 42 E190s pending final documentation," Morgan Stanley Research said in an analysis of Embraer's Q2 results. "This should bring total orders to 104, above Embraer's guided commercial deliveries of 100."

Other positives include new defense contracts, such as the Super Tucano orders from Indonesia and additional fighter renewals for the Brazilian Air Force, Morgan Stanley said in the analysis.

Embraer said it gained three new E-jets customers in the quarter: People's Viennaline, of Austria; Air Astana, of Kazakhstan; and Bulgaria Air.

From an investment perspective, Morgan Stanley Research is sticking to its prior forecast for Embraer. The research firm expects a "gradual upswing" in Embraer's orders, "some of the best products within its niches" and "a valuation near the long-term average despite near-trough earnings."

"The primary risks center on extended global macro volatility and jet fuel prices, in our view," the research firm said.

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