Embraer backlog reached the highest level over past 7 years and deliveries increased 67% in 1Q24

Rhea-AI Summary

Embraer's backlog reached the highest level in the past 7 years, with deliveries increasing by 67% in 1Q24. The strong overall backlog volume of US$21.1 billion (+13% QoQ) was driven by a firm order from American Airlines for 90 E175 jets. Executive Aviation deliveries were the highest in 8 years, while Commercial Aviation deliveries remained flat year-over-year. The company is focused on mitigating business seasonality and increasing production stability.

Positive

• Embraer's backlog hit a 7-year high at US$21.1 billion, up 13% quarter-over-quarter.
• American Airlines placed a firm order for 90 E175 jets, boosting Commercial Aviation backlog by 26%.
• Executive Aviation deliveries surged from 8 to 18 jets in 1Q24, the highest in 8 years.
• Embraer delivered 25 jets in 1Q24, a 67% increase from the previous year.
• The company is implementing a Production Leveling plan to stabilize production throughout the year.
• Commercial Aviation backlog increased by US$2.3 billion in 1Q24, reaching a total of US$11.1 billion.

Negative

• - Defense & Security backlog decreased by 4% to US$2.4 billion in 1Q24.
• - While Executive Aviation saw growth, Defense & Security backlog declined slightly.
• - Services & Support backlog remained flat at US$3.1 billion in 1Q24.

Insights

Aerospace Industry Analyst

Embraer's first quarter performance shows a promising uptick in demand for their aircraft, particularly within the Executive Aviation segment. The marked increase in deliveries here, from 8 to 18 jets, is indicative of a strong market appetite for business jets. This is reflective of broader economic trends where businesses are investing more in travel as we move away from pandemic-induced restrictions. It suggests Embraer's product offerings are resonating with upscale customers, perhaps due to their features, or it could be an indication of successful sales strategies.

However, the flat year-over-year delivery numbers in Commercial Aviation at 7 aircraft could raise questions about growth prospects in that segment. Although this may be a point of concern, the significant backlog growth in the same segment, especially with the large American Airlines order, provides a buffer and signals confidence from one of the largest airlines in the industry. This backlog suggests a robust future revenue stream, albeit with the caveat that the company must ensure that its production capabilities can keep pace with the demand to capitalize on this potential revenue.

Financial Analyst

The significant sequential increase in Embraer's backlog, which now stands at $21.1 billion, represents a substantial 13% quarter-over-quarter growth. From a financial perspective, this is a healthy indicator of the company's order book and future revenue prospects, providing investors with a positive outlook on the company's financial stability and growth trajectory. It highlights strong market confidence in Embraer's offerings, potentially leading to increased investor confidence and a positive impact on the company's stock value.

The 13% increase in backlog over the last quarter outpaces typical industry norms, which usually hover in the single-digit percentage range. The demand growth in the Executive Aviation sector, with the highest number of 1Q deliveries in eight years, also reflects a resilient luxury sector that could potentially offer higher margins relative to commercial aircraft. Such an uptick can be an indication of Embraer's strong market positioning and innovative product development strategies that align with current market demands.

Supply Chain Analyst

A critical component of Embraer's future success lies in its ability to manage supply chains and production levels. The introduction of the Production Leveling plan is a strategic move to address business seasonality and stabilize production. By smoothing out production rates, Embraer can potentially avoid bottlenecks and production inefficiencies that often plague the aerospace industry. This plan, if successful, may lead to a reduction in costs, improve aircraft delivery times and ultimately enhance customer satisfaction.

Given the sheer volume of the backlog and the increase in order commitments, the company's supply chain management capabilities will be tested. Delays, which can be common in the industry due to the complexity of aircraft manufacturing, could erode customer trust and impact future sales. The aerospace industry traditionally works on tight schedules with high penalties for delays, thus effective planning and execution of the Production Leveling plan will be important for Embraer's ability to capitalize on its current momentum.

• Strong overall backlog volume of US$ 21.1 billion (+13% QoQ)
• American Airlines placed a firm order for 90 E175 jets
• Commercial Aviation backlog rose US$2.3 billion (+26% QoQ)
• 1Q Executive Aviation deliveries were the highest of the last 8 years

SÃO JOSÉ DOS CAMPOS, Brazil, April 19, 2024 /PRNewswire/ -- Embraer (NYSE: ERJ; B3: EMBR3) delivered 25 jets in 1Q24, an increase of 67% compared to the 15 aircraft delivered in 1Q23. Executive Aviation showed robust delivery growth, soaring from 8 to 18 jets during the period. The number of deliveries was the highest 1Q of the last 8 years, and more than doubled YoY. Meanwhile, for Commercial Aviation, deliveries were flat YoY at 7 aircraft.

Deliveries by Segment	1Q23	1Q24	2024 Guidance
Executive Aviation	8	18	125-135
Phenom 100	2	1
Phenom 300	4	10
Light Jets	6	11
Praetor 500	-	3
Praetor 600	2	4
Medium Jets	2	7
Commercial Aviation	7	7	72-80
E195-E2	5	4
E175	2	3
Total	15	25	197-215

Embraer delivered 12% of the total number of aircraft implied by the mid-point of the current year guidance for both Executive and Commercial Aviation (25 out of 206). The company has developed, and it is currently implementing, a plan to mitigate its business seasonality. The Production Leveling plan main objective is to have a stable production pace throughout the calendar year in the near to medium-term future.

The company's backlog increased US$2.4 billion or 13% sequentially to US$21.1 billion in 1Q24, compared to a total backlog of US$18.7 billion in 4Q23. The biggest increase happened in Commercial Aviation (US$2.3 billion or 26%) while the smallest one was in Defense & Security (-US$0.1 billion or –4%).

Backlog by Segment - US$bn	4Q23	1Q24	QoQ
Executive Aviation	4.3	4.6	7 %
Defense & Security	2.5	2.4	-4 %
Commercial Aviation	8.8	11.1	26 %
Services & Support	3.1	3.1	0 %
Total	18.7	21.1	13 %

Executive Aviation kept its sales momentum with sustained demand across its entire product portfolio and strong customer acceptance, in both retail and fleet markets. The number of deliveries increased 83% YoY in the light jets segment, and more than tripled in the medium jets one compared to 1Q23. Consequently, Executive Aviation ended with a US$4.6 billion backlog in 1Q24, for a US$ 300 million sequential increase.

In Defense & Security, the first C-390 Millennium of the Hungarian Air Force successfully completed its maiden flight. The aircraft is now undergoing a mission systems integration test campaign, ahead of its entry into service. Another important milestone in the quarter was the first Embraer Defense Day in the United States; an event during which the C-390 Millennium and the A-29 Super Tucano were showcased to government authorities, military officials, prospects, and partners at our facilities in Melbourne, Florida. The C-390 selection by some countries in the EMEA and APAC regions has not yet been incorporated into the backlog, which represents a significant source of upside potential for the coming quarters. The Defense & Security backlog reached US$2.4 billion (-4% QoQ) in 1Q24.

Services & Support continues to be one of the main drivers of Embraer's growth through a combination of operational excellence, customer experience, and innovative solutions. The business unit backlog finished the period sequentially flat at US$ 3.1 billion in 1Q24.

Commercial Aviation posted a US$11.1 billion backlog, or US$2.3 billion higher than in 4Q23. The highlight of the quarter was the deal with American Airlines for 90 E175s, with purchase rights for another 43 additional jets, to meet domestic demand in the United States. Also, Embraer delivered one E195-E2 to Azorra, which will fly under the Royal Jordanian flag.

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SOURCE Embraer S.A.

FAQ

What was the increase in Embraer's backlog in 1Q24?

The backlog increased by 13% quarter-over-quarter to US$21.1 billion.

How much did American Airlines order from Embraer in 1Q24?

American Airlines ordered 90 E175 jets in 1Q24.

What was the growth in Executive Aviation deliveries compared to the previous year?

Executive Aviation deliveries surged by 67% in 1Q24.

How many jets did Embraer deliver in 1Q24?

Embraer delivered 25 jets in 1Q24, a 67% increase from the previous year.

What segment saw the largest increase in backlog in 1Q24?

Commercial Aviation backlog rose by US$2.3 billion, reaching a total of US$11.1 billion.