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Investing.com --HSBC upgraded Brazilian planemaker Embraer to “Buy” from “Hold,” saying a record order backlog, improving output, and growing momentum in executive jets and defense deliveries support a positive earnings trajectory through this year.
The brokerage raised its price target to $57 from $45, citing a higher valuation for Embraer’s eVTOL unit EVE and a lower discount rate in its cash flow model.
The new target implies a 24% upside from current levels.
“With an all-time high backlog of $26.4bn at end-Q1, Embraer offers strong revenue generation in the coming quarters, which is supported by accelerated efforts to remove output bottlenecks and spread production more evenly over quarters,” HSBC wrote.
It expects robust second-quarter performance with nine aircraft already in finished inventory, equal to nearly 20% of last year’s Q2 deliveries.
HSBC forecasts a 28% year-on-year rise in executive jet deliveries in the first quarter of 2025 and sees steady demand in defense, particularly for the KC-390 and A-29 aircraft.
It also flagged the upcoming Paris Air Show as a potential source of new orders.
The bank said the impact of new U.S. tariffs, 10% on Brazilian imports, is likely limited, estimating a roughly 90 basis-point hit to EBIT margins in the Executive and Services segments, but noted that Embraer plans to offset these through cost cuts and increased U.S. content.
Commercial aviation is unaffected, and overall 2025 margin guidance remains unchanged.
HSBC maintained its 2025 revenue estimate of $7.5 billion, at the top of company guidance, and its consolidated adjusted EBIT margin forecast at 7.9%. It now values the company at 10.8x and 8.1x 2025 and 2026 EV/EBITDA respectively, versus a five-year average of 8.7x.
A successful flight test of EVE’s first full-scale prototype, scheduled for mid-2025, could serve as a key catalyst, the firm added.
