Embraer (NYSE:EMBJ) has raised its minimum free cash flow target for 2026 to $400 million, doubling the previous floor of $200 million. The Brazilian aerospace manufacturer also increased its adjusted EBIT margin outlook to a range of 10.0%–10.6%, up from the prior 8.7%–9.3% guidance. The revised forecasts follow a record second quarter, with revenue reaching $2.235 billion and backlog climbing to $34.5 billion.
The upgraded guidance is notable because it comes without any changes to the company's delivery or revenue projections for 2026. Embraer continues to expect commercial deliveries of 80–85 aircraft and executive jet deliveries of 160–170 units, with revenue in the range of $8.2–$8.5 billion. The improved cash flow and margin expectations are attributed to a more favorable product mix, stronger pricing power, and better manufacturing performance, rather than increased output.
In the second quarter, Embraer reported adjusted earnings per ADS of $1.19, well above the Wall Street estimate of $0.62, and adjusted net income of $218.6 million, up 38% year-over-year. Adjusted free cash flow swung to a positive $401.0 million, compared to a loss of $161.6 million in the same period last year, an improvement of more than $560 million.
Revenue in Brazilian reais climbed 10% to 11.34 billion, while net profit rose 25% to 1.11 billion. EBITDA advanced 30% to 1.81 billion. The defense and security segment posted the strongest growth, with revenue up 22% year-over-year, followed by commercial aviation and services.
The company delivered 65 aircraft in the quarter, including 45 executive jets and 20 commercial jets, a 7% increase from the prior year. Chief Executive Francisco Gomes Neto noted that production leveling is a key focus, stating, "In 2027 we’ll see a much better performance in terms of production leveling," as the company works to overcome supply-chain challenges that have constrained output.
Embraer's backlog reached a record $34.5 billion at the end of June, up 16% year-over-year and 7% sequentially. Defense and security led the growth with a 42% increase, followed by commercial aviation at 15%, services and support at 12%, and executive aviation at 5%. The strong backlog provides visibility but also raises the question of how quickly the company can convert orders into cash.
Shares of Embraer rose up to 7% in São Paulo following the announcement, reflecting investor optimism about the improved financial outlook. However, analysts remain divided on the stock's valuation, with price targets ranging from $65 to $97 and an average of $80.80. Of 15 analysts surveyed, 14 rate the stock as a buy or overweight, while one has a hold.
Execution risks remain, particularly around supplier shortages that could delay engine and component deliveries. Additionally, deliveries are still weighted toward the second half of the year, which could impact cash flow timing. The company's ability to maintain the new margin and cash flow levels without increasing production volumes will be a key test for management in the coming quarters.
Embraer's improved guidance signals confidence in its operational efficiency and pricing strategy, but investors will be watching to see if the company can sustain these gains while managing ongoing supply chain pressures.