Embraer Closes $5 Billion Deal with NetJets for Purchase of Executive Jets

Written by Bruno Teles

Published on 12/05/2023 at 16:35

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Embraer, One of the Largest Aircraft Manufacturers in the World, Recently Announced a US$ 5 Billion Transaction with NetJets.

According to the company, the contract involves the purchase of 250 Praetor 500 Jets, which strengthens Embraer’s presence in the Executive Jet Market.

Although the agreement is a purchase option rather than a firm order, if finalized, it will increase Embraer’s order backlog by 29% to US$ 22.4 billion and the backlog for executive jets by 120% to US$ 9.1 billion. Deliveries of the jets are expected to begin only in 2025, and the contract includes after-sales services.

JP Morgan Estimates That If the Deal Goes Through, It Will Be Worth Between US$ 150 Million and US$ 230 Million, Adding Between US$ 0.80 to US$ 1.20 to the Fair Value of Embraer’s ADRs.

This corresponds to 6% to 9% of the company’s current market value, which is estimated at R$ 12.6 billion on the B3. The bank assumes that 100% of the orders will become firm orders and that deliveries will occur within five years, starting in 2025, along with an EBIT margin of 5% to 7.5%, with a 10% tax.

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Analysts from JP Morgan view the announcement as very positive, considering that the growth of Embraer’s backlog is an important pillar of the company’s thesis. Additionally, the order reinforces the quality of the company’s executive jets.

According to BTG, although the agreement does not affect short-term prospects, it helps create positive commercial momentum in executive aviation, indicating that the positive cycle for the segment continues. Investors are eager for new orders across all segments (commercial, defense, and executive) to offset a disappointing first quarter.

This Is Not the First Time NetJets, a Fractional Ownership Company Invested in by Berkshire Hathaway, Has Purchased Aircraft from Embraer.

In 2010, NetJets signed a contract for the acquisition of 50 Phenom 300 Jets, with an option to purchase an additional 75. In 2021, with 100 jets already delivered, NetJets ordered another 100 Phenom 300/E, a US$ 1.2 billion order.

It is worth mentioning that Embraer is currently trading at 5.5x the estimated EBITDA for this year, a significant discount compared to its main global competitors, such as Boeing, Airbus, and Bombardier.

The transaction with NetJets represents an important step for Embraer in the Executive Jet Segment, and the company expects to strengthen its market position by offering high quality and differentiated after-sales services.

Embraer Closes $5 Billion Deal with NetJets for Purchase of Executive Jets

Embraer, One of the Largest Aircraft Manufacturers in the World, Recently Announced a US$ 5 Billion Transaction with NetJets.

JP Morgan Estimates That If the Deal Goes Through, It Will Be Worth Between US$ 150 Million and US$ 230 Million, Adding Between US$ 0.80 to US$ 1.20 to the Fair Value of Embraer’s ADRs.

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This Is Not the First Time NetJets, a Fractional Ownership Company Invested in by Berkshire Hathaway, Has Purchased Aircraft from Embraer.

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Embraer Closes $5 Billion Deal with NetJets for Purchase of Executive Jets

Embraer, One of the Largest Aircraft Manufacturers in the World, Recently Announced a US$ 5 Billion Transaction with NetJets.

JP Morgan Estimates That If the Deal Goes Through, It Will Be Worth Between US$ 150 Million and US$ 230 Million, Adding Between US$ 0.80 to US$ 1.20 to the Fair Value of Embraer’s ADRs.

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