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Forum Newbie
Group: Forum Members
Last Login: Wednesday, August 15, 2007 11:24 AM
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Embraer announced a 49% reduction in second-quarter net profits due to sharply higher costs. Is our investment thesis still intact here? I don't own the stock, but am looking for an entry point.
KU4A
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Forum Member
Group: Administrators
Last Login: Thursday, October 23, 2008 11:28 PM
Posts: 33,
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The drop in profits was primarily because of increased hiring (in the thousands) and capital investments to increase their production capacity and meet demand that has increased their backlog to record levels. So in some sense this drop is not similar to the drop Nautilus experienced last month as results are expected to improve in the third and fourth quarter. I did not see a single analyst downgrade after these results were announced. Hence I am not going to sell our position and plan to hold on to it.
Investors are likely to focus on the headline numbers of both profits and sales dropping and there is a very real risk that third quarter results may not be up to expectations. Given how weak the market has been, it may be prudent to keep the company on a watchlist and not start a new position right now.
--If the doors of perception were cleansed everything would appear to man as it is, infinite. — William Blake.
Yes, I am blogging @ http://www.sinletter.com/ablog.aspx
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