Earnings call transcript: Embraer Q1 2026 Misses EPS Forecast, Revenue Surprises

Embraer S.A. reported its financial results for Q1 2026, revealing a mixed performance with a significant earnings miss but a revenue beat. The company reported an earnings per share (EPS) of $0.1856, falling short of the forecasted $0.2441, a 23.97% negative surprise. However, Embraer’s revenue reached $1.45 billion, surpassing the expected $1.38 billion by 5.07%. Following the announcement, Embraer’s stock dropped by 10.91%, closing at $60.36 from a previous $67.75.

In Q1 2026, Embraer demonstrated robust revenue growth across its business segments, with consolidated net revenues increasing by 31% year-over-year to $1.4 billion. The Commercial Aviation segment saw a 45% rise in revenues, while Defense & Security revenues surged by 62%. Despite these gains, the company faced profitability challenges due to tariffs and logistics costs.

Embraer’s EPS of $0.1856 was a significant miss against the forecasted $0.2441, marking a 23.97% negative surprise. This contrasts with the company’s historical performance, where earnings have typically aligned more closely with expectations. However, revenue exceeded forecasts by 5.07%, indicating strong sales execution.

Following the earnings announcement, Embraer’s stock price fell by 10.91%, closing at $60.36. This decline reflects investor concerns over the earnings miss, despite the positive revenue surprise. The stock’s performance is now closer to its 52-week low of $45.20, highlighting market apprehension. According to InvestingPro data, the stock has declined 14% over the past week, with the company currently trading above its Fair Value—placing it among the most overvalued stocks in the aerospace sector. InvestingPro offers 8 additional exclusive tips for EMBJ subscribers, providing deeper insights into the company’s valuation and performance trends.

Looking ahead, Embraer forecasts EPS growth, with projections of $0.19 for the upcoming quarters and $0.74 for FY2026. Revenue is expected to continue its upward trajectory, with forecasts of $8.43 billion for FY2026 and $9.39 billion for FY2027. Analysts see potential upside of 19%, with price targets ranging from $65 to $97. For investors seeking comprehensive analysis, Embraer is one of over 1,400 US equities covered by InvestingPro’s detailed Pro Research Reports, which transform complex financial data into actionable intelligence. The company remains focused on operational improvements and strategic partnerships to drive future growth.

CEO Francisco Gomes Neto stated, "Despite facing headwinds from tariffs and logistics costs, we are encouraged by our strong revenue growth and operational execution. Our focus remains on enhancing profitability and sustaining momentum across all segments."

During the earnings call, analysts inquired about the impact of tariffs on future profitability and the company’s strategies for mitigating logistics costs. Executives emphasized ongoing cost management initiatives and partnerships to navigate these challenges effectively.

Gui Paiva, Head of Investor Relations, M&A and Venture Capital, Embraer: Good morning, ladies and gentlemen, and thanks for standing by. As a reminder, this conference is being recorded. Its broadcast is intended exclusively for the participants of these events and may not be reproduced or retransmitted without the express authorization of Embraer. This conference call will be conducted in English, but please let me say a short announcement for Portuguese speakers. My name is Gui Paiva, and I’m the Head of Investor Relations, M&A and Venture Capital for Embraer. Welcome to Embraer’s 1st quarter 2026 earnings conference call. The numbers in this presentation contain non-GAAP financial information to help investors reconcile Eve’s financial information in GAAP standards to Embraer’s IFRS. We remind you Eve’s results were discussed at the company’s conference call earlier this week. Before we begin, a legal notice to everyone.

This presentation may contain forward-looking statements which involve risks and uncertainties as detailed in the disclaimer available in the slides and in the documents filed with the Brazilian Securities Commission, CVM. At this time, all participants are in listen only mode. Instructions for the Q&A session will be provided later. Participants on today’s conference call are Francisco Gomes Neto, President and CEO of Embraer, Felipe Santana, Chief Financial Officer, Thais Moraes, Corporate Communications Director, and myself. This conference call consists of three parts. First, we will present the results for the first quarter of 2026. Second, we will host a Q&A session exclusively for investors. Finally, we will hold a dedicated Q&A session for the press. It is my pleasure now to turn the conference call to our President and CEO, Francisco Gomes Neto. Please go ahead, Francisco.

Francisco Gomes Neto, President and Chief Executive Officer, Embraer: Thank you, Gui. Good morning and good afternoon to everyone. It is a pleasure to be here with you to share Embraer’s first quarter 2026 results. We achieved the strongest first quarter revenue in our history, the highest aircraft deliveries in a decade, in another all-time record backlog. We continue to see tangible progress in production leveling and greater stability across our assembly lines. As a side note, Q2 is up for a great start. Shout out to the UAE, who just signed a purchase agreement for 10 C-390 aircraft plus 10 options, the second biggest order after the Brazilian Air Force. This gives us confidence not only to deliver on our 2026 guidance, but also to pursue our midterm ambition of double-digit billion revenues and double-digit EBIT margins. Turning to the highlights of the quarter. Commercial aviation.

Order of 18 E195-E2 jets from Finnair, another very important customer in Europe. Executive Aviation. Best 1st quarter of the decade, driven by strong demand in the launch of the new Praetor 500E and Praetor 600E in the mid and super mid segments. Defense & Security. Double-digit revenue growth. Momentum for C-390 and A-29 platforms, plus a new partnership with Northrop Grumman for the U.S. NGAS program. Services & Support. Expanding recurring revenues through fresh contracts, including Airnorth for E170, E190 fleets, and Hungary for its C-390 fleet. 44 aircraft delivered last quarter, 10 commercial jets, 29 executive jets and five defense. Year-over-year growth. Nearly 50% increase overall, with commercial aviation up 43% and executive aviation up 26%. Commercial aviation guidance.

10 commercial jets delivered equal 12% of guidance midpoint, one point above the five year average. Executive aviation guidance. 29 jets delivered equal 18% of guidance midpoint and seven points above the five year average. Company backlog reached BRL 32 billion in the quarter, up 22% year-over-year. A new historical record for the 6th consecutive time. Commercial aviation backlog reached BRL 15 billion, up 50% year-over-year, with an impressive three book-to-bill ratio over the past 12 months. Other segments backlog. Executive aviation, Defense & Security and Services & Support totaled BRL 17.1 billion, up mid-single digits year-over-year, with the book-to-bill ratios at or slightly above one. Approximately BRL 20 billion in options, which could expand the backlog beyond BRL 50 billion as exercised over time. Now, I would like to share a brief update on Eve’s steady progress.

The taxi campaign is transitioning towards horizontal flights in the second quarter, with our prototype having already completed more than 54 flights. In a total of two hours and 17 minutes of flight time year to date. I will now turn the call over to Felipe to walk you through our financial results. Felipe, over to you.

Felipe Santana, Chief Financial Officer, Embraer: Thank you, Francisco. Good morning and good afternoon, everyone. Let me start with the results by business unit. Our comparisons are year-over-year, unless otherwise noted. Slide nine, Commercial Aviation and Executive Aviation. Starting with Commercial Aviation, revenues were up 45% to $293 million, driven by higher deliveries and pricing. Adjusted EBIT was -$28 million with a -9.7% of margin due to client mix logistics costs and the absence of suppliers credits recorded last year. In Executive Aviation, revenues increased nearly 30% to $480 million, reflecting strong demand and favorable product mix. Adjusted EBIT reached $25 million with a +6% of margin. The declining margin was mainly due to U.S. import tariffs, client mix, and higher selling expenses. Slide 10, Defense, Security, and Services Support.

In Defense Security, revenues increased 62%, reaching $227 million. Adjusted EBIT was $38 million with a positive 17% of margin, driven by higher KC-390 revenue recognition, increased A-29 production, and positive one-time items. In Services & Support, revenues reached $490 million. Adjusted EBIT totaled $70 million with a positive 14.3% of margin, supported by materials and more than offsetting the impact of U.S. import tariffs. Slide 12, Net Revenues. At a consolidated level, net revenues increased 31% to $1.4 billion in the first quarter, representing 17% of guidance midpoint, two points above the five-year historical average. From a business mix perspective, services accounted for 34% of revenues, commercial and executive aviation around 20% each, and defense 16%. Slide 13, Adjusted EBITDA and EBIT.

Adjusted EBITDA was BRL 144 million with 9.9% margin, a small increase compared to a year ago. Adjusted EBIT was $94 million with 6.5% margin, 1 point higher year-over-year and 7.7 points above the five year average. Slide 14, Free Cash Flow and Investments. Adjusted Free Cash Flow excluding IF was -$447 million in the quarter. This reflects our preparation for higher numbers of aircraft deliveries in the coming quarters. Investments totaled BRL 99 million during the quarter compared to BRL 88 million last year, including BRL 38 million in CapEx, BR