Embraer Rises on $950m Contract to Sell Jets to U.S. Air Force

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Embraer ( ERJ , quote )  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 outlook along.

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 sector.

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 here.

We currently have no position in this name.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , International , Stocks

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