Embraer To Supply 23 Business Jets To Mexico-Based Across

Embraer S.A. (NYSE:ERJ) announced that it has signed an agreement to supply 23 business jets to Across, Mexico’s premium business aviation services provider. The order includes eight Legacy 500, eight Phenom 300 and seven Phenom 100E jets. The total value of the deal at current list prices is $260 million.

Embraer is a leading producer of jets in the 70–130 seat category. The company continues to receive orders for its high quality jets, exiting the first quarter of 2016 with a backlog of $21.9 billion. This reflected a 7.4% increase from $20.4 billion a year ago.

The order from the Mexican aviation service provider is already included in the first-quarter backlog. This deal will deepen the bond between Embraer and Across.

The small commercial airplane market is slated to expand over the long term. Embraer in its 20-year Market Outlook had stated that it expects total market deliveries of 6,350 jets – 2,250 units in the 70- to 90-seat segment and 4,100 units in the 90- to 130-seat segment. The global fleet-in-service of the 70- to 130-seat jet is expected to increase from 2,590 aircraft in 2014 to 6,490 by 2034, the fastest growing among all aircraft seat segments.

The replacement of ageing aircraft will represent 39% of new deliveries while 61% of deliveries will come from market growth. Embraer has a strong presence in this segment and is likely to witness significant top-line growth. Its R&D focus will also help the company to hold its ground in a tough competitive market.

The large commercial airplane market is also poised to expand over the long run and have ample growth opportunity for the big commercial airplane producers like The Boeing Company (NYSE:BA) and Airbus Group (PA:AIR) SE (OTC:EADSY) .

Embraer S.A. currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same space is Engility Holdings, Inc. (NYSE:EGL) , carrying a Zacks Rank #2 (Buy).

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