Results to remember

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In the early 2000s, neurologists identified a small group of people with something called hyperthymesia or highly superior autobiographical memory. Only 60 people in the world have been diagnosed with it. Someone with hyperthymesia can be told a date and immediately remember anything significant that happened on it years later.

But even people with hyperthymesia found that their recollection deteriorated during lockdowns. The same is true for those of us with average (or below average) memories.

Embraer, Gulfstream and Textron have all issued strong financial results for the first quarter of 2022 recently. But it is hard to work out what to compare them with. Or even what was happening when.

Gulfstream and Embraer delivered fewer business jets in the first quarter of 2022 than in 2021. Embraer delivered eight aircraft versus 13 in the same quarter in 2021 (and 39 in the last quarter of 2021). Gulfstream delivered 25 in the first quarter compared with 28 in 2021.

This looks disappointing but it is nothing to worry about. It is because of the Omicron variant shutting down suppliers and production lines at the start of the year.

Despite Omicron, Textron Aviation delivered 39 jets in the first quarter of 2022, up from 28 last year and 31 commercial turboprops, up from 14 in last year’s first quarter. This increase, better pricing and strong demand for services meant Textron Aviation’s profit was $121m in the first quarter, up $74m from a year ago.

But should we even be comparing to 2021? The Delta variant hit the US most in the second and third quarters of 2021, but also caused stoppages in March. The Alpha variant affected the second and third quarters of 2020. And 2019 – even if you can remember it – was a very different market.

We should also look beyond deliveries. “As an industry we need to stop the obsession with delivery numbers,” says the CEO of one manufacturer. “It does not really tell you anything. We should be more focused on whether manufacturers are profitable. Because they need profits to invest in new products, supporting the fleet and looking after customers.”  He makes a good point and profit margins are strong.

Embraer Executive Aviation had a gross margin of 18.7% in its first quarter (sales minus the direct costs of making those sales – in this case building aircraft), up from 6.2% in the first quarter of 2021. Textron Aviation had a segment operating margin (sales minus all divisional costs)  of 11.6%.

Gulfstream, which has an amazing track record of strong margins, had an operating margin of 12.8%. The manufacturer said this margin was boosted by the performance of services – both Jet Aviation and Gulfstream Services. Its margin would be even higher if it was not investing heavily in the G400, G700 and G800. New FAA certification requirements mean that the first G700 may not be delivered at the end of this year, with the G800 also delayed, but this is not certain. Gulfstream can also increase production of other models if this happens.

The other numbers worth tracking are backlog and book-to-build (sales-to-deliveries) ratios. Embraer Executive Aviation had a book-to-bill above 2.5 to 1. Gulfstream’s was 2.1 and Textron’s 1.94.

Textron Aviation’s backlog at the end of the first quarter was $5.1bn. At the same time in 2019 it was $2bn.

Gulfstream’s backlog grew $1.3bn in the first quarter of 2022 to $17.6bn. This is up 8.1% on the end of 2021. The manufacturer’s backlog has now grown every quarter since the start of 2021. It says the start of 2022 was the best first quarter it ever had.

So all three manufacturers have results worth remembering. Hopefully we will.

Pictured is an Embraer Executive Jets Phenom 100EV.

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