An investor’s introduction to Embraer



About Embraer

Empresa Brasileira de Aeronáutica, better known as Embraer (ERJ), is Brazil’s largest aerospace company. It was formed in 1969 as a government-owned corporation but went on to be privatized in 1994 in order to avoid a possible bankruptcy. The Brazilian company produces commercial, military, executive, and agricultural aircraft. It also provides aeronautical services. The company has produced more than 5,000 aircraft that operate around the globe in five continents and 80 countries. It’s also the market leader for commercial jets with up to 130 seats and has one of the best lineups of executive jets.

Article continues below advertisement

Embraer competes with Bombardier Inc. (BDRBF) for supremacy in the regional jet market and for third place globally behind Airbus Group (EADSY) and Boeing (BA). These aviation giants are focused on catering to the large region markets, making large-capacity planes that connect major airports throughout the country and abroad. Embraer has been successful in identifying the need for smaller-capacity, narrow-body planes that connect smaller cities to major hubs with flights in the range of 400–1,000 miles. The company has successfully penetrated the segment.

A look at Embraer’s stock performance vs. the S&P 500

An introduction to Embraer is incomplete without comparing its returns to the index. Embraer (ERJ) slightly outperformed the index ETF (SPY) year-to-date, with Embraer recording 7.61% returns compared to 7.16% for index returns. However, for the five- and ten-year periods, the company significantly underperformed the index. For the five-year period, the index returns were close to 78%. Returns from Embraer were only 54%. Similarly, for the ten-year period, the index returns were close to 66%, while returns from Embraer were only 18%.

In the next article, we’ll take a look at the various types of commercial aircraft so we’ll be able to understand Embraer’s (ERJ) business.


More From Market Realist