(Recasts first sentence with share rise, adds CEO comments,
By Brad Haynes
SAO PAULO, March 9 Brazilian planemaker Embraer
SA posted better-than-expected earnings on Thursday
and forecast stronger operating profit this year, lifting shares
to a 10-month high as investors bought in to a new chief
executive's cost-cutting campaign.
Fourth-quarter net income jumped 76 percent from a year
earlier to $195 million, beating an average analyst estimate of
$132 million according to Thomson Reuters data.
Chief Executive Paulo Cesar Silva, who took over in July,
said new cost controls and higher aircraft prices should help
boost operating profit this year despite a drop of as much as 10
percent in commercial jet deliveries.
Embraer forecast net revenue this year between $5.7 billion
and $6.1 billion, down from $6.2 billion in 2016, according to a
securities filing on Thursday. Yet the company forecast 2017
earnings before interest and taxes (EBIT) between $450 million
and $550 million, up sharply from $206 million last year.
The world's third-largest commercial planemaker booked heavy
provisions in 2016 to settle a six-year corruption investigation
and pay for voluntary employee buyouts, which helped bring down
costs in the fourth-quarter figures.
Embraer shares rose as much as 4 percent to a 10-month high
in Sao Paulo on the strong results and positive outlook. Morgan
Stanley raised its target price for New York-listed shares
to $27 from $25.50, after a Wednesday close of $23.76.
The quarterly profit surge was magnified by a weak base of
comparison last year, when Embraer booked a $101 million
provision due to a bankruptcy filing by Republic Airways
. Embraer transferred orders for 24 E175 jets from
Republic to United Airlines in November, contributing to
a $52 million boost for earnings last quarter.
EBITDA, a gauge of operating profit that also discounts
depreciation and amortization, more than doubled to $379 million
in the quarter, beating an average forecast of $260 million.
Embraer's more efficient executive jet production, which is
migrating from Brazil and China to a Florida assembly line,
helped lift the company's gross margin to 20.1 percent from 16.9
percent a year earlier.
After a nearly decade-long slump in the private jet market,
Silva suggested gradual improvement ahead.
"In executive aviation, we think the worst is over," he told
analysts on an earnings call, noting "some upside" to Embraer's
flat revenue outlook in the segment.
For 2017, Embraer maintained its annual delivery target of
105 to 125 executive jets but cut its outlook for commercial jet
deliveries to between 97 and 102 aircraft, down from 108
commercial jets delivered last year.
Embraer is a year away from bringing its re-engined E190-E2
into service, so the company said most commercial aircraft
deliveries this year will again come from its smaller and less
profitable E175, destined mainly for U.S. regional carriers.
Chief Financial Officer Jose Antonio Filippo told reporters
the larger E190 and E195 planes will make up a slightly bigger
share of commercial jet deliveries, helping lift the average
aircraft price for the division.
(Reporting by Brad Haynes; Editing by Bill Trott and Matthew