On Tuesday, Embraer (NYSE:ERJ), a prominent aerospace company, received an upgrade from a CFRA analyst from Hold to Buy. The analyst also increased the price target for Embraer's stock significantly, setting it at $27.00, up from the previous share target of $16.00. This adjustment reflects a new valuation based on the firm's earnings projections and historical averages.
The revised price target is predicated on a 14.6 times multiple applied to CFRA's adjusted earnings per share (EPS) estimate for 2025, after currency adjustments. The new target suggests alignment with Embraer's historical forward average. The analyst has raised the 2024 earnings per American Depositary Share (ADS) forecast by BRL0.12 to BRL6.75 and established a 2025 estimate at BRL9.25.
Embraer's fourth-quarter results showed an adjusted earnings per ADS of BRL1.90 compared to BRL0.65 in the same period the previous year. However, these figures fell short of the consensus estimate by BRL1.55. The financial estimates by the analyst assume an exchange rate of 5.0 Brazilian Reais (BRL) per U.S. Dollar (USD).
The company's commercial aviation segment reported a year-over-year revenue increase of 20%, and its adjusted EBIT margins expanded by 50 basis points. Embraer also experienced a 13% year-over-year increase in total aircraft deliveries for 2023. Looking ahead, the company anticipates an 18% rise in commercial aircraft deliveries for 2024.
The analyst expressed optimism about Embraer's future, suggesting that the worst supply chain issues that have affected the company may be subsiding. While acknowledging that some challenges may persist into 2024, the overall situation appears to be improving.
The analyst also highlighted Embraer's business diversification, improved debt metrics, and the absence of significant debt maturities until 2026 as additional positive factors supporting the upgrade.
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