After a disappointing 3Q earnings announcement and a
lackluster Investor Day, Embraer (ERJ, quote) may be shaping up
for a good "trade", and remains one of the highest quality
companies in the world.
Simply the stock is at 6 month lows and NOW the street is coming
in with caution on margins and concerns over deliveries.
Where were ya over the summer when the stock danced near $40 a
Embraer has an order book in both in commercial aircraft and
business aircraft that is impressive and growing. They also have
growing exposure to defense industry spending in Brazil that is
an exciting growth opportunity.
The CEO said yesterday that while margins may be lower in
2013, they reiterated EPS. More importantly in my view they
see a much more balanced 4Q jet mix. He was very upbeat on
the executive jet market and said it would make more relevant
contribution in near term. Most exciting comments were the
double digit defense growth in 2014.
Embraer closed yesterday at $29.39 and had 3X volume day that
looks like a bit of a capitulation move. A lot of the 3Q
weakness should have been priced into the stock and looks as if
overly ebullient expectations through 2Q were more than priced in
over the summer. Around $28.00-$28.50 there is tremendous
technical support for the stock.