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Embraer’s stock has turned into a battleground between “backlog bulls” and “execution skeptics.” On one side, you have a record $31.6 billion firm-order backlog and 18% delivery growth in 2025. On the other, you have a stock that’s already up more than 50% in less than a year and now trades on demanding multiples for an aircraft OEM still wrestling with supply-chain constraints and airline credit risk.

From our perspective at DeepValue, ERJ has evolved into a conversion story, not a demand story. According to the 20-F (2025), p.24, Embraer ended 2024 with $26.3 billion in firm backlog and expects $23.3 billion of that to convert within five years. By 4Q25, the firm-order backlog had reached a record $31.6 billion, up 20% year over year, while 2025 deliveries rose 18% to 244 aircraft, including 78 commercial and 155 executive jets, per the Embraer backlog release, Jan 27 2026.

The question for investors is simple and uncomfortable: are you being paid enough to underwrite execution risk at 41.6x earnings and 14.3x EV/EBITDA?

Our answer right now is no. We rate ERJ a WAIT, with a more attractive entry zone closer to $55 or after we see hard evidence from 1H26 that deliveries are becoming less seasonal and backlog quality is holding up.

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Embraer in 2026: Great Backlog, Tight Margin of Safety

Embraer sits in the capital goods bucket but behaves more like a hybrid between a cyclical industrial and a long-cycle infrastructure play. It sells regional commercial jets, business jets, and defense aircraft, and it monetizes those platforms through high-margin Services & Support over time. According to the 20-F (2025), p.24, 2024 revenue was $6.4 billion, with nearly 95% denominated in U.S. dollars and 59.1% of total revenue coming from North America.

The core segments are:

Commercial Aviation – E175 and E2 regional jets
Executive Aviation – Phenom and Praetor business jets
Services & Support – aftermarket maintenance, logistics, spares
Defense & Security – including the KC‑390 tactical airlifter

The market today is not questioning whether demand exists. The record backlog and ongoing order headlines make that clear. The debate is whether Embraer can convert that backlog into a smoother, less back-half‑loaded delivery profile without breaking the balance sheets of its airline customers or its own supply chain.

Our one‑line thesis: this is a high-quality franchise with an emerging installed-base moat, but the current stock price already discounts a clean execution path we haven’t seen yet.

Valuation: Paying Up for a “Perfect Conversion” Story

By late December 2025, ERJ had run from $42.16 to $64.28, a roughly 52% move. At that price, the stock traded at about 41.6x P/E and 14.3x EV/EBITDA, based on our analysis of reported figures. For a company still fighting supplier bottlenecks and airline restructurings, that’s an execution premium, not a turnaround discount.

We see no real margin of safety at these levels:

The only tangible downside buffers are:
$2.6 billion in cash and financial investments
$1.0 billion of undrawn revolver capacity
$3.3 billion in customer advances (contract liabilities) at December 31, 2024

Those help liquidity; they don’t protect the equity if deliveries slip, cancellations accelerate, or Embraer has to step in with more customer financing.

Our base case sees fair value around $70, with a 55% probability, assuming mid‑single‑digit delivery growth in 2026 and gross margin roughly flat near 18%. The bear case, at $48 (25% probability), reflects flat deliveries, increased airline stress, and a weaker cash conversion cycle. The bull case, at $88 (20% probability), assumes KC‑390 exports ramp faster and Defense/Services mix lifts group gross margin above 19%.

At ~$64, the risk/reward skews uncomfortably towards “priced for success,” which is why we prefer to wait.

How Does Embraer Actually Make Money?

Understanding ERJ means separating backlog from cash.

Revenue Mechanics and Working Capital

Embraer recognizes most aircraft revenue at delivery, while Services & Support and some defense contracts can be recognized over time or at milestones. According to the 20-F (2025), p.2, backlog consists mainly of firm orders supported by non-refundable advance payments.

By year-end 2024, customer advances stood at $3.2846 billion as contract liabilities, which convert into revenue as deliveries and milestones occur. The 20-F (2025), pp.68, F‑60, 74 make it clear that 2024 operating cash flow benefited from higher contract liabilities and payables, including supplier finance arrangements with around 104-day payment terms.

This is important: ERJ’s cash generation is highly sensitive to delivery timing and working-capital swings. It’s not enough to have backlog; you need a cadence that:

Pulls in new advances
Converts existing advances to revenue
Keeps suppliers and customers synchronized

The company’s own filings highlight that extended delays can trigger cancellations or rescheduling rights for customers, per the 20-F (2025), p.4. That means “firm” is conditional on Embraer hitting certain performance thresholds.

The Installed-Base Moat: Services & Support

Where we get incrementally bullish on the long-term business model is Services & Support.

2024 segment gross margin: 28.0%, up from 26.7% a year earlier
Services backlog: $4.6 billion, up from $3.1 billion in 2023

These figures from the 20-F (2025), pp.68, 72 show that Services is structurally more profitable than the consolidated business, where gross margin was 18.0% in 2024. As the installed fleet grows, the services mix should slowly pull group margins higher.

Embraer is leaning into this advantage:

It’s investing up to $70 million in a Fort Worth MRO site, with operations starting in 2Q25 and a second hangar planned by 2027, per the 20-F (2025), p.42.

If this capacity ramps as planned, we see a credible path to more stable, recurring revenue and higher margins over the next 2–5 years. But you still need the aircraft deliveries today to grow the installed base tomorrow.

When we model businesses like Embraer, we rely on DeepValue to auto-ingest 10-K/20-F and 10-Q/6-K filings, so we can focus on interpretation instead of manual data hunting.

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Backlog Quality: Concentrated Customers, Hidden Credit Risk

On the surface, a $31.6 billion firm-order backlog sounds bulletproof. Underneath, the picture is much more nuanced.

Concentration in Commercial Aviation

The 20-F (2025), p.6 lays out a level of customer concentration that should make any value investor pause:

E175 backlog: 90.9% of firm orders come from just three U.S. regional operators:
American Airlines
Republic Airlines
SkyWest Airlines
E2 backlog: Azul, Porter, Azorra, Mexicana, and AerCap account for 78.8% of E2 orders, per the 20-F (2025), pp.6, 32, 85.

That concentration means a single customer’s restructuring can move the needle on backlog, delivery schedules, and market sentiment.

We’ve already seen one clear example: Azul’s Chapter 11 process, which led Embraer to reduce Azul’s firm E195‑E2 orders from 51 to 25 and caused a 5% sequential drop in Commercial backlog in 4Q25, according to the 6-K (2026), Jan 27 2026. Coverage from Air Data News, Dec 2025 confirmed this as a high-profile renegotiation.

The problem isn’t just headline risk. Many firm contracts include:

Cancellation/reschedule provisions if delays extend
“Backstop commitments” where Embraer agrees to provide customer financing at delivery if third-party credit isn’t available, as disclosed in the 20-F (2025), p.F‑55

That creates a nasty pro-cyclical dynamic: the weaker your airline customers get, the more your own balance sheet is on the hook at precisely the moment your working-capital needs are peaking.

Executive Aviation and Defense: Helpful, but Not Immune

Executive Aviation also carries concentration risk. The 20-F (2025), p.6 notes that the majority of the global executive fleet is destined for four large clients, with significant fleet deliveries. That’s a lumpy, relationship-heavy business that can swing schedules if a single buyer pulls back.

Defense is structurally different. KC‑390 is gaining traction:

46 KC‑390 firm orders overall, with 33 units in the firm-order backlog as of 4Q25, per the backlog release, Jan 27 2026
Sweden ordered four C‑390s to join a joint European transport fleet, according to Army Recognition, Oct 6 2025
Portugal is acquiring a 6th KC‑390 and holds 10 options, as reported by European Security & Defence, Jun 16 2025

We like the KC‑390 export story, but it’s still a smaller absolute profit pool today relative to Commercial and Executive, and timing on European defense procurement can slip, as Lithuania’s postponed adoption plan after 2030 shows via The Defense Post, Jan 28 2026.

Our takeaway: backlog quality is good but fragile. The upside scenario requires the Azul episode to stay idiosyncratic, not the first domino in a broader credit cycle.

“Production Leveling” and the 2026 Execution Test

Management has been vocal about the need to reduce 4Q delivery bunching and smooth out throughput. The 6-K (2026), Jan 27 2026 explicitly highlights “production leveling” and signals that additional tangible results are expected in 2026.

From an investor’s standpoint, this matters for three reasons:

1. Seasonality: Heavy 4Q clustering makes earnings and cash flow more volatile and exposes you to late‑year shocks.

2. Working Capital: Smoother quarter-to-quarter deliveries mean more stable advances, payables, and inventory flows.

3. Backlog Risk: Persistent delays or lumpy execution raise the probability that customers trigger cancellation/rescheduling rights.

Our base case assumes:

2026 deliveries grow mid-single digits
Gross margin stays near 18%
4Q is still bigger, but less extreme relative to 1H

But we want evidence, not just guidance.

90-Day and 180-Day Checkpoints

We’re structuring our monitoring around concrete dates:

By May 19, 2026 (90 days)

If 1Q26/early‑2Q26 deliveries show reduced seasonality vs prior years, the production-leveling thesis strengthens.
If 4Q still looks like the only quarter that matters, we’d argue for smaller position sizing or continued patience.

By August 17, 2026 (180 days)

No new customer-specific Commercial backlog resets beyond Azul? That supports the view that credit stress is contained.
A second named customer renegotiation would tell us backlog risk is structural, not idiosyncratic, and would be a strong negative signal.

We also watch the PW1900G (GTF) engine story closely. According to Aviation Week, Nov 17 2025, Embraer has seen shop turn times halved and is guiding to no GTF‑related AOG cases after 2026. If that proves correct, it removes a key bottleneck on E2 operations and deliveries. If it reverses, E2 reliability and schedule risk come right back to the front burner.

Is ERJ Stock a Buy in 2026?

From where we sit, this is the central investor question.

At today’s valuation, you’re effectively paying for:

Clean backlog conversion into 2026–2027
Stable or improving gross margins despite tariffs
Contained airline credit stress beyond Azul
Continued executive-jet strength and services mix uplift
KC‑390 export follow-through

That’s a lot of “ands” embedded in the price.

Our Rating Framework

In our one-pager, we summarize our stance as:

Rating: WAIT
Conviction: 3.0 (on our internal scale)
Attractive Entry: Around $55
Trim Above: Around $80
Re-assessment Window: 3–6 months (tied to 1H26 evidence)

What would change our mind?

Rating gets more positive if:

By 2Q26, deliveries are up year over year with less 4Q bunching, and Commercial backlog remains stable after the Azul reset.

Rating gets more cautious if:

In 1H26, another named E2 customer renegotiates in a way that cuts Commercial backlog by >3%.

In other words, we’re letting the 2026 cadence data “vote” on whether the current execution premium is justified.

For investors who like to systematically track these kinds of triggers, Read our AI-powered value investing guide for a deeper look at how tools like DeepValue can monitor filings and industry sources in parallel without drowning you in noise.

Will Embraer Deliver Long-Term Growth?

Stepping back from the next few quarters, we actually like Embraer’s 2–5 year setup—provided you don’t overpay.

Long-Term Growth Drivers

Key structural positives we see:

Scaling Services & Support

The Fort Worth service center expansion through 2027, described in the 20-F (2025), p.42, should translate into higher services capacity and stronger margin durability. With services margins already above 28%, more mix here is inherently accretive.

KC‑390 Defense Flywheel

International adoption is building, particularly in Europe. The Embraer backlog report, Jan 27 2026 plus coverage from Army Recognition and European Security & Defence suggests a credible export pipeline. If options and framework agreements convert into firm multi‑year production slots, Defense mix should support both growth and margins.

Eve UAM Optionality

Embraer holds an 83.7% stake in Eve UAM, according to the 20-F (2025), p.6. The electric vertical takeoff and landing (eVTOL) story remains highly speculative, but Financial Times, Dec 2025 highlights recent prototype milestones and a target for commercial launch around end‑2027. We don’t underwrite meaningful economics from Eve in the near term, but we recognize it as a long-dated call option that could re-rate sentiment if certification and early operations go smoothly.

Resilient Business-Jet Demand

Industry context from WSJ, Feb 2026 shows Bombardier guiding for >157 jet deliveries and >$10 billion revenue in 2026, suggesting that business-jet demand remains solid across the cycle. That supports Embraer’s Executive Aviation book of business.

Put simply, if you zoom out beyond 2026, it’s easy to sketch a world where:

Services and Defense are a bigger share of the pie
Margins are structurally higher
Cash flows are less cyclical

Our hesitation is not about the destination—it’s about the price of admission today and the bumps along the way.

If you’re weighing whether to buy now or wait for a pullback, DeepValue can model base, bull, and bear cases across ERJ and its peers in parallel, so you can see where the best risk‑adjusted opportunities really are.

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Key Risks to Keep Front and Center

For anyone already holding ERJ—or considering an entry on weakness—we think risk management should be explicit, not implicit.

1. Supply Chain and Engine Constraints

Embraer’s own filings frame supply-chain disruptions as the primary bottleneck to returning to pre-pandemic delivery levels, as noted in the 20-F (2025), p.65. Even with progress on PW1900G, the E2 ecosystem is still exposed to:

Engine shop capacity
Spare availability
Airworthiness directives or unexpected technical issues

We’ve already seen E2 deliveries pushed to align with engine upgrades, such as SalamAir postponing E195‑E2 operations into end‑2026/early‑2027 due to GTF engines, per Air Data News, Mar 1 2025. Any renewed wave of GTF-related AOG events or extended turnaround times would directly undermine the “no GTF AOG after 2026” confidence.

2. Airline Distress and Backlog Renegotiations

Azul’s Chapter 11 renegotiation is the obvious case study. Our framework is:

A single Azul-style reset is manageable.
A pattern of resets is thesis-breaking at today’s valuation.

The 6-K (2026) already recorded a 5% QoQ Commercial backlog decline in 4Q25 tied to the Azul adjustment. If another named E2 customer cuts orders in 1H26, and the backlog shrinks by >3% from a single renegotiation, the “record backlog” narrative loses its edge and we’d expect the multiple to compress.

3. Tariffs and Policy Risk

Embraer currently bears U.S. tariffs that its CEO has publicly estimated as an extra $1.8 million per aircraft and around $70–80 million per year in total cost, based on context from the 20-F (2025), p.24 and WSJ, Oct 15 2025. Reuters reporting via Investing.com, Jun 5 2025 framed the impact as “limited” for now, but that depends on ERJ’s ability to pass costs on without losing orders.

Given that North America accounts for nearly 60% of revenue, any worsening in the tariff situation—or failed expectations around a bilateral deal—could erode competitiveness and margins in Embraer’s largest market.

4. Governance and Capital Allocation Discipline

We don’t have full incentive detail in the data provided, but we do see clear signals on capital allocation:

Management is deploying capital into high-ROIC areas like MRO capacity (Fort Worth), as per the 20-F (2025), p.42.
The company maintains a solid liquidity posture, with net debt/EBITDA around 1.03 at year-end 2024, and leans on working-capital levers like supplier finance arrangements, as outlined in the 20-F (2025), pp.26, 74, F‑39.

We view this as broadly positive—but the reliance on contract liabilities and extended payables also means that any sharp change in delivery cadence can quickly reverse working-capital benefits.

How We’d Approach ERJ as Investors

Putting it all together, here’s how we’re framing ERJ in 2026:

Quality: Above average

Real installed-base moat via Services & Support
Credible defense growth with KC‑390
Attractive long-term mix shift potential

Balance Sheet: Solid, but not a backstop for equity losses

$2.6 billion in cash/investments plus $1.0 billion revolver
Net leverage modest, but still exposed to working-capital volatility

Valuation: Rich

~41.6x P/E and 14.3x EV/EBITDA at ~$64
Implied fair value in our base case: ~$70
Bear case: ~$48, bull case: ~$88

Key 2026 Watchpoints:

1H26 delivery cadence vs historical 4Q clustering
Any additional customer-specific backlog renegotiations
PW1900G reliability and absence of new AOG headlines
Traction in KC‑390 firm orders and services backlog growth

Our playbook:

Existing holders

We’d lean toward partial risk management (trimming) above $80 or on any signal that 1H26 isn’t improving seasonality. Conversely, if 1Q/2Q26 numbers show clear production-leveling progress with no major backlog hits, holding makes sense.

Prospective buyers

We prefer either:

A pullback toward $55, which would restore some margin of safety, or
A “pay up for proof” stance—waiting until 1H26 confirms smoother cadence and backlog stability, even if the stock is somewhat higher by then.

Either way, ERJ belongs on the watchlist, not in the ignore pile.

To keep ERJ and its key risk markers on your radar without manually parsing every 6-K and industry article, you can have DeepValue track and digest the filings for you, turning days of work into a few minutes per name.

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Embraer S.A. (ERJ) Deep Research Report: Backlog Strength vs. Execution Risk in 2026–2027