Now They Downgrade Embraer?

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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.

Image courtesy Antônio Milena/ABr: http://commons.wikimedia.org/wiki/File:Embraer_190.jpg 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 share?

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.



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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