Embraer’s orders and deliveries grow together as Citi sees defense upside

Why can the backlog expand even as deliveries increase?

Embraer’s backlog reached 35.7 billion dollars in the third quarter of 2026, up 3% quarter on quarter and 14% year on year. All four business segments had book-to-bill ratios above 1, meaning new orders exceeded revenue for the same period and demand continued to replenish the backlog faster than revenue consumed it.
Commercial aviation was the largest source of orders, with a quarter-end backlog of 15.8 billion dollars, up 5% quarter on quarter. The segment secured firm orders for 36 aircraft in the third quarter, with a book-to-bill ratio of 1.2; it received firm orders for 72 E2 series aircraft over the first three quarters.
Executive aviation’s backlog stood at 8.2 billion dollars, up 5% quarter on quarter, supported by demand for the Phenom and Praetor; services and support reached 5.6 billion dollars, up 2% quarter on quarter. Their book-to-bill ratios were 1.4 and 1.3, respectively, and together they accounted for about 39% of the total backlog, providing broader support for future business.

The defense and security business had a quarter-end backlog of 6.1 billion dollars, broadly flat quarter on quarter, while it delivered one KC-390 during the period. Colombia’s order for two KC-390 aircraft helped the segment achieve a book-to-bill ratio of 2.9, the highest of the four segments, leading Citi to see the most pronounced potential upside in the business.
The disclosed backlog includes 43 KC-390 aircraft. The recently announced selections by Slovakia and Lithuania have not yet been included; Citi estimates they could add roughly 1 billion dollars to the backlog. This additional amount depends on the selections subsequently becoming firm orders.

Embraer delivered 66 aircraft in the third quarter, up 2% quarter on quarter and 6% year on year; deliveries totaled 175 aircraft in the first three quarters, up 14% year on year. Actual deliveries increased alongside the expansion of the backlog.
Deliveries in the first three quarters reached 67% of the midpoint of full-year guidance, above the 59% average for the same period over the past five years. Citi therefore believes production scheduling is becoming more balanced, visibility into full-year execution has improved, and deliveries are somewhat less concentrated at year-end.

Citi rates the stock Buy, with a target price of 90 dollars per ADR, implying potential upside of about 30% from the price of 69.21 dollars on 22 October. The target uses a discounted cash flow model for 2026–2030, with a weighted average cost of capital of 8.7% and a perpetual growth rate of 4.7%.
The bank’s enterprise value-to-EBITDA valuation is 10.5 times, below the peer average of 12 times, and it cites strong execution and growing demand in the main businesses as support for the valuation.
The profitability of order growth also faces constraints: Citi notes that commercial or executive aircraft orders secured through excessive discounts would depress margins. Thus, although the bank sees a book-to-bill ratio above 1 as a signal that may favor pricing, eventual profit performance still depends on transaction prices; changes in government aviation policy and intensifying competition would also affect its assessment.