Embraer (ERJ) Arm to Supply Up to 40 eVTOLs to Fahari Aviation

Embraer S.A.’s ERJ subsidiary, Eve UAM, LLC (EVE), recently inked a deal with Kenya Airways’ subsidiary, Fahari Aviation, for delivering up to 40 of its electric vertical takeoff and landing (eVTOL) vehicles to the latter. The delivery is projected to commence in 2026.

The agreement, signed through a Letter of Intent, aims to forge ahead the development of the Urban Air Mobility (“UAM”) system in Kenya and prepare a model that will support cargo drone operations in Kenya.

Significance of Eve’s eVTOL

Eve’s eVTOL lift & cruise vehicle is electric-powered and has the most practical design for efficiency and certifiability. Moreover, its multiple rotors are used to take off and land vertically, and at cruise altitude, rear propellers push the aircraft forward as in a wing-borne flight, providing a low-noise experience and making it easier to move within cities while avoiding traffic jams.

Considering such remarkable features of Embraer’s eVTOL that can efficiently fulfill urban environment requirements amid the rising demand for next-generation air mobility systems, Embraer may witness a strong inflow of orders involving its eVTOL, like the latest one. This, in turn, is likely to bolster ERJ’s revenues from the eVTOL aircraft line of business.

Growth Prospects of eVTOL

UAM is an evolving market trend that boasts immense growth potential due to the mounting congestion in traffic at the ground level. Also, the rising concerns over carbon emissions leading to increased measures by nations to curtail effects on the climate are further expected to fuel the demand for UAM.

Per the report from the Markets and Markets firm, the global eVTOL market is anticipated to expand at a CAGR of 15.3% during the 2021-2030 period.

Such an expanding size of the eVTOL market tends to provide ample prospects for companies like Embraer to reap the multitude of gains and prosper in the growing demand. A few companies that stand to benefit from the growing eVTOL aircraft market are Airbus SE EADSY, Textron TXT and Boeing BA.

Airbus’CityAirbus NextGen is an all-electric, four-seat eVTOL multicopter concept featuring a wing. It boasts an 80-km range and a cruise speed of 120 km/h, which makes it perfect for zero-emission flight operations for a variety of applications in major cities.

Airbus’ long-term earnings growth is pegged at 12.4%. The Zacks Consensus Estimate for EADSY’s 2022 earnings suggests a growth of 3% from the prior-year reported figure.

Textron’s business segment, Bell, is working on the plans to launch an eVTOL, Bell Nexus. Bell Nexus 4EX is a four-duct vehicle, which is configurable in an electric or hybrid-electric platform. With a hybrid platform, Nexus 4EX promises an extended reach to travel farther or to more remote locations based on mobility needs. The stock’s other eVTOLs include FCX-001 and Bell AerOS.

The long-term earnings growth rate of Textron is pegged at 12.7%. The Zacks Consensus Estimate for TXT’s 2022 earnings suggests an improvement of 21.5% from the prior-year reported figure.

Boeing’s subsidiary, Aurora Flight Sciences, is part of Boeing NeXt, an organization that is leading the safe and responsible introduction of next-generation air vehicles for urban, regional and global mobility. Its passenger air vehicle or PAV is a multirotor aircraft designed and developed for Boeing NeXt, which is leading the safe and responsible introduction of on-demand mobility.

Boeing’s long-term earnings growth rate stands at 4%. The Zacks Consensus Estimate for BA’s 2022 sales indicates an improvement of 21.8% from the prior-year reported figure.

Price Performance

Shares of Embraerhave dropped 39.7% in the past year compared with the industry’s decline of 43.9%.

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Zacks Rank

Embraer currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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