Earnings call transcript: Embraer Q1 2026 sees record revenue, stock dips

Embraer SA reported a record-breaking revenue of 1.4 billion USD for Q1 2026, marking a 31% increase year-over-year. Despite this strong performance, the stock price reacted negatively in premarket trading, dropping 4.65% to 64.6 USD. The company’s revenue slightly surpassed forecasts, but challenges in profitability margins and cash flow may have contributed to the market’s cautious response.

Embraer demonstrated robust growth in Q1 2026, with revenue surging 31% compared to the same period last year. This performance was fueled by strong demand across its business segments, particularly in defense and executive aviation. However, profitability faced headwinds due to cost pressures and tariff impacts.

The actual revenue of 1.4 billion USD slightly exceeded the forecast of 1.38 billion USD, indicating a positive surprise. However, the exact EPS figures were not disclosed, making it difficult to assess the full impact on earnings per share expectations.

Despite the positive revenue results, Embraer’s stock price dropped 4.65% in premarket trading. This decline might reflect investor concerns over profitability and cash flow, overshadowing the revenue beat. The valuation picture adds context to investor caution: the stock trades at a P/E ratio of 27.75 with a PEG ratio of 14.5, suggesting a premium valuation relative to near-term earnings growth. According to InvestingPro analysis, the stock appears overvalued against its Fair Value estimate, placing it among considerations for the Most Overvalued stocks. The stock remains below its 52-week high of 80.75 USD, indicating room for recovery.

Embraer projects continued growth, with future revenue forecasts for 2026 and 2027 indicating substantial increases. Wall Street analysts maintain an optimistic outlook with a consensus rating of Outperform and price targets ranging from $65 to $97. The company’s financial foundation remains solid, earning a "GREAT" overall health score of 3.18 from InvestingPro, supported by a 10% return on equity and its position as a prominent player in the Aerospace & Defense industry. Investors seeking deeper insights can access Embraer’s comprehensive Pro Research Report, one of 1,400+ available reports that transform complex Wall Street data into clear, actionable intelligence. The company plans to expand its product offerings, including new executive jet models and defense contracts, which are expected to drive future performance.

CEO Francisco Gomes Neto stated, "Our record-breaking first quarter revenue is a testament to the strong demand across our segments. We are committed to addressing the challenges in profitability and cash flow to ensure sustainable growth."

During the earnings call, analysts focused on Embraer’s strategies to mitigate supply chain issues and manage tariff impacts. Executives emphasized ongoing efforts to optimize production and improve cost management to enhance profitability.

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, Taís 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 CEO, 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 5 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, 1 point above the 5-year average. Executive aviation guidance. 29 jets delivered equal 18% of guidance midpoint and 7 points above the 5-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 3 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 1. 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 2 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 9, 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 5-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, BRL 36 million in tangible additions, BRL 14 million in the pool program, and BRL 11 million in research. Slide 15, Adjusted Net