Story
Moody's Upgrades Embraer to 'Baa2' on Improved Leverage and Strong Backlog
Summary
Moody's Ratings has raised Embraer's credit rating to Baa2 from Baa3, citing the aerospace company's strengthening credit metrics, conservative financial policies, and a growing order book.
Moody's Ratings has upgraded Brazilian aerospace manufacturer Embraer S.A. (NYSE:ERJ) to Baa2 from Baa3, signaling increased confidence in the company's financial health. The ratings agency also revised its outlook for Embraer to stable from positive, according to a statement released Monday.
The upgrade reflects Embraer's sustained improvement in key credit metrics and a track record of conservative financial management. Moody's highlighted the company's enhanced resilience and strong liquidity position as central to the decision.
Strengthening Financial Metrics
The ratings action was supported by significant enhancements to Embraer's balance sheet. Moody's noted several key improvements:
- Gross Leverage: The company's adjusted gross leverage fell to 2.4x in the twelve months ending June 2026, a notable decrease from 3.6x at the end of 2025.
- Operating Margins: Adjusted operating margins recovered to 9.0% from 8.1% over the same period.
- Order Backlog: Embraer's backlog grew to $34.5 billion as of June 2026, a 16% increase from the previous year, providing strong revenue visibility.
AdFrom 2021 to 2025, Embraer generated approximately $1.7 billion in free cash flow and reduced its debt by around $7.7 billion. Moody's anticipates the company's leverage will remain in the 2.0-2.5x range and that it will maintain a net cash position.
Liquidity and Market Position
Embraer's liquidity is robust, with cash and short-term investments totaling $2.3 billion at the end of June 2026. Moody's stated this was sufficient to cover all debt maturities through 2030. The company also has access to a $1 billion committed credit line due in 2029.
The rating also incorporates the likelihood that Embraer could receive financial support from Brazilian public banks if necessary. However, Moody's noted that the rating remains constrained by the cyclical nature of the aviation industry, increasing competition, and the high, ongoing capital investment required to meet evolving customer demands.
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