While Bombardier is struggling to find new customers for its C-series airliner, its Brazilian competitor Embraer (NYSE:ERJ) said that its firm order backlog reached a record US$22.9 billion in the second quarter, during which it delivered 60 commercial aircraft.
Embraer, the third largest aircraft manufacturer after Boeing and Airbus, beat the previous record of USD 20.4 billion recorded in the first quarter. In April, May and June, Embraer delivered 27 airliners and 33 business jets – another area where Bombardier has been struggling.
The company appears to be headed for higher records, as it secured US$2.6 billion firm orders at the Paris air show in June. This amount includes seven E190 for Chinese Colorful Guizhou Airlines, eight E175 for American SkyWest Airlines, ten E-175 for United Express and 15 E190-E2 for US based lessor Aircastle.
Embraer stresses that the orders "do not include sales and purchase option rights under the contracts."
Meanwhile, the lifting of sanctions against Iran following the nuclear deal signed on July 14 will be a boon for commercial aircraft manufacturers such as Airbus and Boeing, but Embraer, as well, as the Middle Eastern country has estimated needing at least 400 new aircraft, half of which single-aisle.
Given, the Canadian government’s decision to uphold sanctions – for the time being - Bombardier will not be able to compete in the lucrative Iranian market.
Despite the filled up order books, Embraer announced losses of US$58.9 million in the first quarter, due to an increase in its income tax expense due to the sharp devaluation of the Brazilian Real.
Scotiabank has issued a “sector outperform” recommendation for Embraer, with a target of US$38/share, stressing that the stock has significantly "underperformed" in the last 10 weeks and is now trading at 8 and 7.1 times its EBITDA expectations (earnings before interest, taxes and amortization) 2015 and 2016. On July 16, the stock was trading at US$31 or 0.5% higher.