Beat it, missed it, beat it, missed it, beat it, missed it ...

For six quarters now, Brazilian aviation firm Embraer (NYSE:ERJ) has provided a living illustration of the topsy-turvy business of selling aircraft to carriers such as US Airways (NYSE:LCC), JetBlue (NYSE:JBLU), Continental (NYSE:CAL), and ExpressJet (NYSE:XJT). When your product sells for millions of bucks a pop, it doesn't take many delayed sales to fall short of expectations. Conversely, sell even a couple of extra units in a quarter, and you can easily soar right past those estimates. If Embraer's pattern of alternating outperformance and underperformance holds true, tomorrow should be one of the good quarters. Fingers crossed.

What analysts say:

  • Buy, sell, or waffle? A dozen analysts keep Embraer on their radar. Eight rate it a buy, three a hold, and one a sell.
  • Revenues. On average, analysts expect less than a 1% rise in quarterly sales, to $1.2 billion.
  • Earnings. Profits are predicted to fall by nearly one-third, to $0.60 per American Depositary Receipt. (For Embraer, each ADR represents four shares of local common stock.)

What management says:
So far this year, Embraer has announced sales of five E-195s to Italy's Alpi Eagles, and five E-190s to Swiss-based M1 Travel (which also took out an option on as many as five more 190s or 195s.) So we're off to a reasonably slow start for 2007, in which management anticipates delivering as many as 170 aircraft.

As for Q4, the company tallied up its results in January, and announced the results: 37 jets delivered for the fourth quarter of 2006 (130 for the full year), and 67 new firm orders placed. That made an 11% sequential increase in backlog, bringing the value of the firm's backlog (firm orders placed, to be fulfilled in the future) to an all-time high of $14.8 billion at year's end.

What management does:
With a long-tail business like Embraer's, in which it can take years for a sale to go from pitch to order to delivery, it's even more important than usual to take a long view of how the company is doing. Quarter-to-quarter results are just too darn erratic. Here's what we get when we examine results from a trailing-12-month perspective: Gross margins have been slipping for quite a while, dragging operating margins right down with them. Not good.

Margins

6/05

9/05

12/05

3/06

6/06

9/06

Gross

34.4%

32.9%

30.2%

29%

28.3%

28.3%

Operating

14.7%

15.3%

13.6%

10.8%

11.5%

8.8%

Net

10.9%

10.4%

11.6%

10.7%

11.5%

10.8%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
That said, Motley Fool Stock Advisor co-analyst David Gardner retains his faith in the company. Reading the same weakening margins you see above, David explained in his semiannual update on all of his Stock Advisor picks that Embraer's production delays are hurting its profits. Even so, David highlights the huge growth in backlog, calling it "a stunning 30%." That, by the way, was before the January news described backlog leaping to a -- startling, I suppose? -- $14.8 billion.

One factor David urges investors to keep in mind: "Higher fuel costs may actually work in Embraer's favor, since it puts pressure on carriers to move to more fuel-efficient planes." Like Embraer's.

What did we expect out of Embraer last quarter, and what did we get? Find out in:

Fool contributor Rich Smith does not own shares of any company named above.