Why Embraer (EMBR3) Is Itaú BBA’s Top Pick for 2025: 5 Key Reasons to Buy Now
- Embraer's Stellar Q2 2025 Financial Performance
- The 5 Growth Engines Driving Embraer's Outperformance
- Why the Market Got EMBR3 Wrong
- Price Target Boosted to US$69
- FAQ: Your Embraer Investment Questions Answered
Embraer (EMBR3) just delivered a knockout Q2 2025 performance that has analysts at Itaú BBA doubling down on their "top pick" recommendation. With soaring EBITDA margins, a surprise earnings revision, and multiple growth catalysts, this Brazilian aerospace giant might be one of the most undervalued plays in the market right now. Here's why the smart money is betting big on EMBR3.
Embraer's Stellar Q2 2025 Financial Performance
When Embraer initially reported a R$53.4 million adjusted net loss for Q2 2025, the market panicked - but that reaction turned out to be premature. The company later corrected an accounting error, revealing an actual adjusted net profit of R$675 million (US$119 million), smashing expectations by 80%. This wasn't just a paperwork fix - it revealed fundamental strength across all key metrics:
- Adjusted EBITDA surged to R$1.39 billion from R$995.5 million YoY
- EBITDA margin expanded to 13.5% (vs. 12.7% in Q2 2024)
- Adjusted EBIT hit R$1.08 billion, up from R$725.5 million
- EBIT margin reached 10.6%
"These are frankly impressive numbers that should have triggered a market rally," notes Daniel Gasparete's analyst team at Itaú BBA. Yet EMBR3 shares fell 2% post-earnings - a disconnect that creates what the bank calls "positive asymmetry" (finance speak for "buying opportunity").
The 5 Growth Engines Driving Embraer's Outperformance
Itaú BBA isn't just bullish - they've made EMBR3 their top pick alongside Marcopolo, and they've got five concrete reasons why:
- Commercial & Defense Momentum: Both divisions are firing on all cylinders, with defense contracts particularly strong given global geopolitical tensions.
- Consensus-Beating Potential: Itaú's 2025-26 EBIT projections are 5-6% above market consensus after recent 9% and 6% upgrades.
- Tariff Relief: The recent US decision to remove Embraer planes from 40% additional tariffs could be just the start.
- EVE Flight Tests: December 2025 test flights for the electric vertical takeoff aircraft could be a major catalyst.
- Attractive Valuation: Despite 50% YTD gains, EMBR3 trades at just 8.7x forward EBITDA vs. peers at 12-15x.
Why the Market Got EMBR3 Wrong
Here's where things get interesting. That initial 2% drop post-earnings? Itaú's trading desk suggests Quant funds overreacted to the erroneous loss figure before the correction. "This created artificial selling pressure," explains Gasparete, "but the fundamentals tell a completely different story."
The numbers back this up:
| Metric | Q2 2025 | Q2 2024 | Change |
|---|---|---|---|
| Adjusted Net Profit | R$675M | R$N/A | +80% vs expectations |
| EBITDA Margin | 13.5% | 12.7% | +80 bps |
| EBIT | R$1.08B | R$725.5M | +49% YoY |
Price Target Boosted to US$69
Convinced by Embraer's execution, Itaú just raised their ADR (ERJ) price target from US$62 to US$69 - implying 25% upside from current levels. What's particularly telling is how this Stacks up against history:
- ERJ has gained 50% YTD
- Jumped 20% since US tariff relief
- Still trades below 5-year average multiples
"We see multiple paths to value realization," says the BBA team, pointing to defense contract wins, eVTOL progress, and potential additional tariff reductions. For investors who missed the first 50% move, this might be your second chance.
FAQ: Your Embraer Investment Questions Answered
Why did Embraer shares fall after good earnings?
Quant funds likely overreacted to an initial erroneous loss report before Embraer corrected it to show an 80% earnings beat. This created temporary selling pressure.
What's the price target for EMBR3?
Itaú BBA raised their ADR target to US$69 (from US$62), implying ~25% upside. For the local EMBR3 shares, this suggests similar upside potential.
Is Embraer stock still undervalued after its 50% YTD gain?
Yes - it trades at just 8.7x forward EBITDA versus aerospace peers at 12-15x. The EVE eVTOL opportunity isn't fully priced in either.
When will EVE have test flights?
December 2025 is the current schedule for crucial flight tests of Embraer's electric vertical takeoff aircraft.
What could go wrong with this investment thesis?
Key risks include defense budget cuts, eVTOL delays, or a global recession reducing commercial aircraft demand. However, the current valuation provides margin of safety.
