Embraer, the Brazilian aerospace giant, has reported its third-quarter results for 2024. The quarter has been marked by an overall sound performance and a historic order backlog at a nine-year high.
On the commercial aircraft side, Embraer has revised its expected 2024 deliveries down slightly, to 70-73 aircraft. CEO Francisco Gomes Neto cites supply chain problems and related issues as the primary cause.
Overall, the company’s performance reflects strong momentum across its business segments, particularly in Executive Aviation and Defense & Security.
Record-Breaking Order Backlog & Strong Market Position
The company achieved a remarkable milestone with its order backlog reaching US$22.7 billion in Q3 2024 – the highest level in nine years.
This represents a substantial increase of over 25% year-over-year and nearly 10% quarter-over-quarter. It ably demonstrates a robust level of market demand for Embraer’s aircraft portfolio.
Delivery Performance
Embraer’s delivery performance in the third quarter of 2024 saw strong growth across all segments. The company delivered a total of 59 aircraft, with the majority coming from its executive jet division. This contributed 41 units split between 22 light and 19 medium jets.
The commercial aviation segment added 16 aircraft to the total, while the Defense & Security division delivered two C-390 Millennium military transport aircraft.
These numbers represent a significant improvement, with overall deliveries increasing by 26% compared to the previous quarter’s 47 units. It showed an impressive 37% growth compared to the same period last year.
Commercial Division: Supply Chain Issues
There is a slight adjustment in Commercial Aviation delivery expectations for 2024. This is adjusted down to 70-73 aircraft from the previous 72-80 range.
CEO Gomes Neto explained that, in general, the manufacturer has seen improvements in the supply chain in Q3.
However, problems exist with specific groups of components, notably engines and structural parts. The E2 family variants have been particularly affected.
Financial Performance Highlights
The third quarter of 2024 proved to be exceptionally strong for Embraer’s financial performance. The company generated revenues of US$1,692 million, marking a substantial 32% increase from the previous year.
Particularly noteworthy was the performance of both the Executive Aviation and Defense & Security segments, each achieving remarkable 65% year-over-year revenue growth.
The company’s profitability metrics were equally impressive, with adjusted EBIT reaching US$297.5 million and achieving a 17.6% margin.
Free cash flow performance was strong as well, with adjusted free cash flow (excluding Eve) reaching US$241.1 million, primarily driven by the increased number of aircraft deliveries.
Credit Rating Upgrade
Embraer’s financial stability has received significant recognition from major rating agencies. In a notable development, Fitch Ratings upgraded the company’s credit rating to investment grade “BBB-” with a stable outlook in late September.
This upgrade aligns with S&P’s investment grade rating. Moody’s maintains its Ba1 rating, just one notch below investment grade, with a recently revised positive outlook.
These ratings reflect growing confidence in Embraer’s financial health and strategic positioning.
Updated 2024 Guidance
Management has revised its full-year guidance for 2024, reflecting a balanced approach to opportunities and risks.
There is a slight adjustment in Commercial Aviation delivery expectations to 70-73 aircraft from the previous 72-80 range.
Notably, management has increased its profitability expectations, raising the adjusted EBIT margin guidance to 9.0-10.0% from the previous 6.5-7.5% range.
Additionally, the adjusted Free Cash Flow target has been elevated to US$300 million or higher, up from the previous US$220 million threshold.
Conclusion
Despite the slight reduction in commercial aircraft deliveries, Embraer’s full Q3 2024 results demonstrate the company’s strong market position and operational efficiency.
With a record-breaking backlog, improved credit ratings, and robust delivery numbers, the aerospace manufacturer appears well-positioned for sustained growth in the coming quarters.
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