What's that in the sky? Is it a bird? Is it a comic book superhero in tights? No, it's Brazilian plane-builder Embraer (NYSE:ERJ), en route to deliver a cargo of third-quarter 2006 earnings news Monday afternoon.

What analysts say:

  • Buy, sell, or waffle? Analysts tracking Embraer have grown to a full dozen, and twice as many rate the stock a buy as do a hold.
  • Revenues. On average, analysts are looking for a 13% drop in sales to $922.3 million .
  • Earnings. . and for profits to dive twice as fast, to $0.46 per ADS.

What management says:
One week ago, Embraer made its latest sales announcement, this time of a deal to sell three Embraer 170 jets and 11 190s to Australia's Virgin Blue Airlines. October, too, was a busy month. The firm booked a 24-plane order from Spain's Wondair for Phenom 100 jets, with options to both upgrade the planes to Phenom 300s and upgrade the order to an additional 12 jets. Assuming neither upgrade occurs, the deal is still worth a good $70 million to Embraer (at list price, which nobody ever pays). Another Phenom-enal deal was signed with Midwest "aircraft sales, management and maintenance services" provider Eagle Creek -- this one for 12 Phenom 100s and four 300s. That's another $61 million (minus discount) coming down the pike. Finally, fractional jet ownership provider Avantair agreed to buy a score of Phenom 100s for an even $57 million (same discount caveat).

Also, in mid-October, Embraer inked a partnership deal with Bank of America (NYSE:BAC) whereby BoA would refer business jet buyers to Embraer, and receive a head start on landing the financing deals for any resulting sales.

Focusing on Q3, in early October Embraer ran down its totals for "new firm orders" announced in the third quarter: 137 commercial orders total, breaking down as 50 ERJ 145s, 50 Embraer 190s, 30 175s, and seven 170s. The firm also sold numerous executive jets of the Lineage 1000, Legacy 600, and Phenom varieties. At the "deliveries" end of the supply chain, it knocked its 2006 estimate down by 10 planes to 135, but shifted those 10 into 2007, predicting at least 160 planes will be delivered in that year.

What management does:
So business is booming at Embraer -- unfortunately, profitability continues to slide at the gross and operating margin levels. On the net line, the business got a couple of boosts from one-time benefits in the December and June quarters, which explain the slight spikes in the rolling net margin for those quarters.

Margins %

3/05

6/05

9/05

12/05

3/06

6/06

Gross

34.6

34.4

32.9

30.2

29.0

28.3

Op.

14.9

14.7

15.3

13.6

10.8

11.5

Net

10.4

10.9

10.4

11.6

10.7

11.5
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:
Just for fun, in today's Foolish Forecast I think it might be helpful to parse the above order numbers to figure out how much each Phenom sold yields in revenues for Embraer. Starting with the 20 Phenom 100s sold to Avantair, we can calculate the list price there at $2.85 million per plane. Wondair's Phenom 100s appear to list at $2.92 million. And Eagle Creek's Phenom 300s appear to be going for about $6.7 million a pop.

Pulling up a copy of a January sales brochure for the planes (see it here, in all its PDF glory), therefore, it looks like Embraer is gradually raising the prices on its planes from what it was planning to charge less than one year ago, suggesting pretty decent pricing power at the plane-maker. Good to know.

Competitors:

  • General Dynamics (NYSE:GD)
  • Lockheed Martin (NYSE:LMT)
  • Northrop Grumman (NYSE:NOC)

Thinking of flying with Embraer? Don't forget to read your Foolish flight manuals:

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