March 13, 2013 / 4:39 PM / in 5 years

UPDATE 2-Embraer shares hit five-year high on earnings, sales outlook

* CEO sees major U.S. regional jet orders within months

* EBITDA beats forecasts due to currency, payroll tax cut

* 2013 profitability on track to beat guidance -analysts (Updates share performance, adds sales outlook)

By Brad Haynes and Roberta Vilas Boas

SAO PAULO, March 13 (Reuters) - Shares of Embraer SA climbed to a five-year high on Wednesday after the Brazilian planemaker reported strong earnings and an optimistic outlook for orders from major U.S. airlines.

The company’s stock rose as much as 3.7 percent in early Sao Paulo trading to 17.74 reais, its highest since February 2008, before limiting gains to about 2 percent as the benchmark Bovespa stock index sank later in the session.

Government support for Brazilian exporters and recovering demand for Embraer’s 70- to 120-seat regional jets have boosted the company’s outlook even as other local industries struggle.

In the battle with Canadian rival Bombardier Inc to renew the regional fleets of United Continental and merger partners American Airlines and US Airways, Chief Executive Frederico Curado signaled major orders are on the way.

“There’s a couple of major campaigns in the United States that may mature relatively soon, within the next few months,” Curado told analysts. “We are confident that we are going to take a significant share of those opportunities.”

Executives have said new U.S. orders could amount to as many as 400 planes by the middle of next year.

PROFITABILITY BOOST

A payroll tax cut and a more favorable exchange rate also helped Embraer make planes more profitably than it has in years.

Earnings before interest, taxes, depreciation and amortization rose more than five-fold from a year earlier to $312 million, according to a late Tuesday filing, beating a forecast of $277 million in a Reuters poll.

EBITDA climbed to 14.4 percent of revenue last year, the highest in at least five years -- a period in which the EBITDA margin averaged 11.2 percent.

Profit margins are likely to climb even higher this year, analysts suggested, due to the full-year effect of government stimulus announced in April 2012 and subsiding administrative expenses forecast by the company.

Deutsche Bank analyst Myles Walton suggested on the call that those factors alone could boost operating profit margins more than 2 percentage points this year.

But Curado said Embraer was reluctant to lift its 2013 EBITDA forecast from between 13 percent and 14 percent of revenue, adding that the company may revise its outlook upward mid-year, as it did in 2012 by 1 percentage point.

INCOME TAXES BITE

A stronger U.S. dollar boosted Embraer’s income tax bill, however, bringing quarterly net profit to $124 million, below an average estimate of $163 million.

That compares with a loss of $92 million in the final quarter of 2011, when Embraer was hurt by a provision for the bankruptcy of American Airlines’ parent company.

American has returned 39 regional jets to Embraer as part of an agreement restructuring the planemaker’s financial guarantees on its planes, Chief Financial Officer Jose Antonio Filippo told journalists on a conference call to discuss results.

Embraer is working to resell the planes to leasing companies and other airlines, he said, and any losses due to the restructuring should be covered by provisions made in 2011.

A proposed merger between American and US Airways may also breathe new life into one of the largest operators of Embraer’s regional jets. Executives have said orders this year from major U.S. carriers could help lift sagging commercial jet output. (Editing by W Simon, Maureen Bavdek and Andrew Hay)

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