MTU Aero Engines (OTCMKTS:MTUAY) and Embraer-Empresa Brasileira de Aeronautica (NYSE:ERJ) Critical Contrast

MTU Aero Engines (OTCMKTS:MTUAY) and Embraer-Empresa Brasileira de Aeronautica (NYSE:ERJ) are both large-cap aerospace companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, analyst recommendations, risk, earnings, valuation, institutional ownership and dividends.

Profitability

This table compares MTU Aero Engines and Embraer-Empresa Brasileira de Aeronautica’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MTU Aero Engines	10.60%	24.07%	7.30%
Embraer-Empresa Brasileira de Aeronautica	5.43%	13.38%	3.92%

Volatility & Risk

MTU Aero Engines has a beta of 1.34, indicating that its stock price is 34% more volatile than the S&P 500. Comparatively, Embraer-Empresa Brasileira de Aeronautica has a beta of 1.87, indicating that its stock price is 87% more volatile than the S&P 500.

Institutional & Insider Ownership

0.0% of MTU Aero Engines shares are held by institutional investors. Comparatively, 34.7% of Embraer-Empresa Brasileira de Aeronautica shares are held by institutional investors. 1.0% of Embraer-Empresa Brasileira de Aeronautica shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current recommendations and price targets for MTU Aero Engines and Embraer-Empresa Brasileira de Aeronautica, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MTU Aero Engines	0	2	1	1	2.75
Embraer-Empresa Brasileira de Aeronautica	1	1	4	2	2.88

Embraer-Empresa Brasileira de Aeronautica has a consensus price target of $59.40, indicating a potential downside of 0.90%. Given Embraer-Empresa Brasileira de Aeronautica’s stronger consensus rating and higher possible upside, analysts clearly believe Embraer-Empresa Brasileira de Aeronautica is more favorable than MTU Aero Engines.

Valuation and Earnings

This table compares MTU Aero Engines and Embraer-Empresa Brasileira de Aeronautica”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MTU Aero Engines	$8.02 billion	2.87	$684.97 million	$8.66	24.72
Embraer-Empresa Brasileira de Aeronautica	$6.39 billion	1.72	$352.50 million	$2.05	29.24

MTU Aero Engines has higher revenue and earnings than Embraer-Empresa Brasileira de Aeronautica. MTU Aero Engines is trading at a lower price-to-earnings ratio than Embraer-Empresa Brasileira de Aeronautica, indicating that it is currently the more affordable of the two stocks.

Dividends

MTU Aero Engines pays an annual dividend of $0.83 per share and has a dividend yield of 0.4%. Embraer-Empresa Brasileira de Aeronautica pays an annual dividend of $0.05 per share and has a dividend yield of 0.1%. MTU Aero Engines pays out 9.6% of its earnings in the form of a dividend. Embraer-Empresa Brasileira de Aeronautica pays out 2.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Summary

Embraer-Empresa Brasileira de Aeronautica beats MTU Aero Engines on 9 of the 17 factors compared between the two stocks.

About MTU Aero Engines

MTU Aero Engines AG, together with its subsidiaries, engages in the development, manufacture, marketing, and maintenance of commercial and military aircraft engines, and aero-derivative industrial gas turbines in Germany, other European countries, North America, Asia, and internationally. It operates through two segments: Original Equipment Manufacturing (OEM Business); and Maintenance, Repair, and Overhaul (MRO Business). The company offers commercial aircraft engines for wide body jets, narrow body and regional jets, business jets, and turboprops; military aircraft engines for fighter jets, helicopters, and transporters; and industrial gas turbines. It also maintains, repairs, and overhauls commercial and military engines; and manufactures and markets various spare parts. The company was formerly known as MTU Aero Engines Holding AG and changed its name to MTU Aero Engines AG in May 2013. MTU Aero Engines AG was founded in 1913 and is headquartered in Munich, Germany.

About Embraer-Empresa Brasileira de Aeronautica

Embraer S.A. designs, develops, manufactures, and sells aircraft and systems in North America, Latin America, the Asia Pacific, Brazil, Europe, and internationally. The company operates through Commercial Aviation; Defense & Security; Executive Aviation; Services & Support; and Other segments. The Commercial Aviation segment designs, develops, manufactures, and sells commercial jets, as well as leases aircraft. The Defense & Security segment engages in the research, development, production, modification, and support for military defense and security aircraft; and offers a range of products and integrated solutions that include radars, special space systems, and cyber security solutions, as well as information and communications systems comprising command, control, communications, computer, intelligence, surveillance, and reconnaissance systems. The Executive Aviation segment develops, produces, and sells executive jets. This segment also leases Phenom family executive jets in the entry jet and light jet categories; and Praetor 500 and Praetor 600, disruptive executive jets in the midsize and super midsize categories. The Service & Support segment provides after-service solutions and support services; maintenance, repair, and overhaul services for commercial, executive, and defense aircraft; and aircraft components and engines. This segment also supplies steel and composite aviation structures to various aircraft manufacturers. The Other segment engages in the supply of fuel systems, structural parts, and mechanical and hydraulic systems; and production of agricultural crop-spraying aircraft. The company was formerly known as Embraer-Empresa Brasileira de Aeronáutica S.A. and changed its name to Embraer S.A. in November 2010. Embraer S.A. was incorporated in 1969 and is headquartered in São Paulo, Brazil.