Moody's Rating Upgrade for Embraer
Moody's Investors Service upgraded Embraer S.A. (NYSE:ERJ) to a long‑term credit rating of Baa2 on Monday, moving the rating up from Baa3 and changing the outlook from positive to stable. The upgrade reflects the company’s continued improvement in credit metrics throughout 2026, its conservative financial policies, and strong liquidity that have enhanced the resilience of its credit quality.
Credit Metrics
- Adjusted gross leverage declined to 2.4x for the twelve months ended June 2026, down from 3.6x at the end of 2025.
- Adjusted operating margins improved to 9.0% from 8.1% over the same periods.
- Moody's expects adjusted gross leverage to stay within a 2.0‑2.5x range going forward, and anticipates Embraer will remain a net‑cash issuer, using cash generation to further strengthen its balance sheet.
Cash Flow and Debt Reduction
- From 2021 to 2025, Embraer generated approximately $1.7 billion in free cash flow.
- During the same period, the company repaid roughly $7.7 billion of debt.
- The rating also factors in the likelihood of receiving funding from Brazilian public banks if required.
Liquidity Position
- As of the end of June 2026, cash on hand and short‑term investments totaled $2.3 billion, sufficient to cover all scheduled debt maturities through 2030.
- Embraer also has $1 billion of committed credit lines that mature in August 2029.
Order Backlog
- The order backlog stood at $34.5 billion at the end of June 2026, representing a 16% increase compared with the same period in 2025.
Rating Constraints
- Moody's notes that the rating is constrained by the cyclical nature of the aviation business, rising competition, and the significant ongoing investments needed to meet evolving customer demands.
- The capital‑intensive nature of aircraft manufacturing, together with working‑capital pressures and high investment requirements, further limits the rating outlook.