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Embraer shares fall after downgrade

NEW YORK -- Shares of Embraer SA lost 4 percent Wednesday after an analyst downgraded the Brazilian plane maker's stock citing weak demand for regional and business jets.

THE SPARK: Cowen analyst Cai von Rumohr cut the stock to "Neutral" from "Outperform," saying he believes a business slowdown is making it unlikely the company will hit Wall Street's expectations for earnings next year.

THE ANALYSIS: The analyst notes that Embraer is seeing order cancellations for its business jets, and it appears its third quarter was weaker than normal due to slowing Asian growth and purchase delays in the U.S. He said he expects delivery of the jets will be "lackluster" for the summer and flat in 2013.

Embraer's regional jet business is also slower than usual and is dependent on a large offer from a U.S. airline, which is not yet guaranteed.

Rumohr said demand could remain dampened through 2014 if the global economy continues to be weak. Airlines are hesitant to buy new jets when the economy is weak because if passenger demand is falling, there's no need to expand the fleet. Airlines are also keen to keep costs low in periods of economic uncertainty.

SHARE ACTION: Embraer's U.S.-traded shares fell $1.05 to $25.17 on Wednesday. They is down from its year high of $35.55 reached in April.

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