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Embraer (ERJ) Inks Agreement for 10 Passenger to Freight Jets

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Embraer S.A.ERJ recently inked a deal for the delivery of up to 10 Embraer E-Jets Passenger to Freight (P2F) conversions to an undisclosed customer. The delivery, expected to commence in 2024, includes the conversion of the customer’s existing E-Jets fleet.

The deal follows Embraer’s launch of the E190F and E195F P2F aircraft in March 2022, through which the company intends to capitalize on the growing freighter demand in the fast-growing e-commerce market.

Significance of Embraer’s P2F Conversions

Embraer’s P2F conversionsboast 50% more volume capacity, three times the range of large cargo turboprops, and nearly 30% lower operating costs than narrowbodies. Moreover, the net weight and volume capacity that ERJ’sP2F conversions offer are also remarkable.

Impressively, the maximum gross structural payload is 13,150 kg for the E190F and 14,300 kg for the E195F. While the E190F can handle a payload of 23,600 lb (10,700kg), the E195F can carry 27,100 lb (12,300 kg).

Considering the enhanced version of these jets, coupled with strong growth prospects that the e-commerce market has in store, the company’s launch of P2F conversions may prove to be prudent and is likely to provide a handful of returns for the company. The latest deal is a bright example of that.

Growth Prospects of Freighters

The continuous rising global trade is likely to propel the growth of the air freight market.In such a scenario, aerospace majors continue to induce new investments in the air freight market to expand their footprint and capitalize and prosper in the growing trend.

Going forward, per the report from Expert Market Research, the global air freight market is likely to expand at a CAGR of 12% over the 2022-2027 period. A few companies that stand to benefit from the growing air freight market, apart from Embraer, are Airbus SE EADSY and Boeing BA.

Airbus’ freighter and cargo jets fleet mainly comprise the A330-200F, A321P2F, A330P2F BelugaST and BelugaXL. The newest addition to this fleet is the A350F, equipped with the latest-generation innovation from the A350. The freighter also bears features that reduce fuel burn and CO2 emissions. The A330-200F is a new-generation cargo aircraft that meets the freight business’ requirements in the mid-size and long-haul segments.

Airbus’ long-term earnings growth is pegged at 12.4%. The Zacks Consensus Estimate for EADSY’s 2022 earnings suggests growth of 3% from the prior-year reported figure.

The Boeing freighter family delivers the right payload capacity and range capability. Its freighters fleet consists of the high-volume 747-8 Freighter and the long-range 777 Freighter and the market-leading standard-body 737-800 Boeing Converted Freighter. The company recently launched the 777-8 freighter family as the world’s most capable and fuel-efficient freighter for a sustainable future.

Boeing’s long-term earnings growth rate stands at 4%. The Zacks Consensus Estimate for BA’s 2022 sales indicates an improvement of 21.8% from the prior-year reported figure.

Price Performance

Shares of Embraerhave dropped 38.8% in the past year compared with the industry’s decline of 42%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Zacks Rank

Embraer currently carries a Zacks Rank #3 (Hold). A better-ranked stock from the same industry is Lockheed Martin LMT, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Lockheed Martin’s 2022 earnings suggests a growth rate of 18.6% from the prior-year reported figure. Its 2023 earnings estimate has been revised upward by 0.3% to $28.24 in the past 60 days.

Lockheed Martin’s long-term earnings growth rate stands at 5.7%. LMT shares have returned 10.3% in past year.

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The Boeing Company (BA) : Free Stock Analysis Report
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EmbraerEmpresa Brasileira de Aeronautica (ERJ) : Free Stock Analysis Report
Airbus Group (EADSY) : Free Stock Analysis Report
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