) is up today on $950 million contract to sell jets to U.S.
Air Force, fulfilling what was a core part of our positive call
The view was that ERJ presented significant upside linked to
their ability to book elusive U.S. defense contracts, while it
has been expected they will leverage a position within Brazil to
gain a bigger part of the country's expanding defense budget.
These catalysts are falling into place. Add all of this to a
resilient and stable order book, and you have a stock whose
valuation has upside trigger.
A 37% move off the December 14th low should be treated with
caution for new investment allocations, but should be a
validation of the investment themes that are likely to change
over the next twelve months.
To remind, I featured Embraer as a charter member of the
"Ambassadors Index" on "
Trading the Globe"
in January of 2012, as one of the high quality global emerging
market companies that would continue to be a dominant player its
The stock has run 26% from that call but was still traded
based investors unclear vision of their order book. Contracts
with commercial airlines like Delta and the disappointment that
flowed from less than spectacular commitments kept the stock in
lower trading range.
The Republic air order of 5 weeks ago was the first driver to
take the stock higher Today's news will lead to more upgrades and
is another catalyst to the stock. At 12.8x '13 P/E ERJ is
attractive relative to its recent history and offers upside from
We currently have no position in this name.