The Brazilian economy has been sluggish lately, but that hasn't held back aircraft manufacturer Embraer (ERJ -0.82%). The move toward more efficient aircraft and smarter equipment selection among airlines seeking to match capacity to demand has led to a big jump in Embraer sales, and coming into its third-quarter financial report, Embraer investors were hoping that revenue would climb even if the company's bottom line remained under pressure. For its part, Embraer gave investors a positive surprise by growing its adjusted net income, and the future look quite bright for the company. Let's take a closer look at how Embraer did and whether it can live up to its potential.

Image source: Embraer.

Embraer has a solid quarter

Embraer's third-quarter results showed the growth potential that the aircraft manufacturer has. Revenue jumped 18% to $1.51 billion, outpacing the 15% growth that most investors had expected to see. Embraer again suffered a GAAP loss, but it was narrower than in the year-ago period, and after allowing for non-cash items and social contribution funds, adjusted net income climbed 11% to $79.1 million. That worked out to adjusted earnings of $0.43 per share, which was $0.12 higher than the consensus forecast among those following the stock.

Taking a closer look at the results, Embraer once again saw its segments perform very differently. The commercial aviation unit was the big winner, seeing its revenue climb by 35% thanks largely to higher aircraft deliveries during the period. The defense and security segment also saw a healthy 19% rise in segment revenue, but the executive jet segment once again stumbled, posting sales that were 9% lower than in the year-ago quarter.

Embraer's delivery numbers were mixed. On the commercial side, Embraer delivered 29 aircraft, up from 21 in the previous year's third quarter. 24 of those aircraft were E-175 regional jets, but the company also delivered four E-190s and a single E-195 as well. By contrast, executive jet delivery totals fell, with only 25 aircraft compared to 30 in the year-ago period. However, the mix was more favorable, with just 13 light jets but 12 large jets within the total. Total backlog fell to $21.4 billion, down $500 million in just the past three months.

Why Embraer is optimistic about the future

Looking ahead, Embraer has a lot to be optimistic about. The quarter was a solid one in terms of order activity, with the company saying that it collected firm orders for its new E2 family of regional jets, including E190-E2 orders from Indonesia's Kalstar Aviation and E195-E2 orders from Arkia Israeli Airlines. In addition, Japan Airlines has become an increasingly important partner for Embraer, and the company said that it extended its Flight Hour Pool Program with the airline to cover parts for the entire fleet.

In addition, Embraer managed to put what could have been an ugly investigation behind it. Earlier in October, the aircraft manufacturer finalized definitive agreements with the Securities and Exchange Commission and the U.S. Department of Justice related to alleged violations of the U.S. Foreign Corrupt Practices Act. The company paid a total of $205 million to the two regulatory bodies in disgorgement of profits and penalties, which is just $5 million more than the company had already reserved for. The SEC and DOJ will monitor Embraer for three years, and if no further issues arise, then the charges will be dismissed. Embraer then made similar settlements with the Brazilian counterparts of those two regulators, and hopefully, the combination of moves will put an end to the episode entirely. That said, a class action from investors has argued that Embraer didn't properly disclose the investigations, and so Embraer will have to defend those charges going forward.

Embraer stock responded favorably to the overall news, rising more than 3.5% in pre-market trading following the announcement. As long as the Brazilian aircraft manufacturer can keep taking advantage of strong demand for its planes, Embraer has plenty of opportunity to keep seeing its business grow in the months and years to come.