Ferrari’s (NYSE:RACE) Earnings, Profits Running Ahead of ‘Expert’ Estimates

Ferrari’s (NYSE:RACE) Earnings, Profits Running Ahead of ‘Expert’ Estimates

Ferrari’s (NYSE:RACE) Earnings, Profits Running Ahead of ‘Expert’ Estimates


When Ferrari (NYSE:RACE) came to market in October 2016 sector analysts and investors worried the shares were too expensive because they were valued as if it was a luxury goods company, not a car maker.

To the naysayers’ dismay Ferrari’s performance on the stock market beat The Street.

Since a low of about 38 in July 2107, the shares marked a high at 141.56 on 7 May.

Earlier this month, Ferrari reported a 13% rise in Q-1 earnings of $326-M, compared with the same frame in Y 2017, and a 32.8% profit margin, up from 29.5%.

Analysts appear convinced that Ferrari times can only get better.

“Ferrari – even with its fantastic margins is a very expensive stock. It’s on over 30 times 2018 earnings and over 500% of sales. But we also need to recognize that this company keeps growing margins, keeps beating guidance and keeps announcing new product decisions that are almost guaranteed to drive growth higher to levels we never envisaged even a year ago,” said Bernstein Research analyst Max Warburton

Ferrari plans to launch its FUV in Y 2021.

Ferrari sold 8,398 vehicles in 2017, led by 12-cylinder models like the GTC4Lusso and the 812 Superfast, and expects this to rise to more than 9,000 in 2018. At the Geneva Car Show in March, Ferrari launched the 488 Pista with a 710-hp V8 engine. This successor to the 360 Challenge Stradale, 430 Scuderia and 458 Speciale will blast from 0-60 mph in 2.7 seconds and on to 211 mph

Some investors have been wary of plans for Ferrari to raise sales too quickly worrying this might dilute its exclusive brand.

Ferrari is the #1 brand in the worldwide automotive sector.

But its value on the market has powered ahead, and they are not worrying now.

The jump in EBITDA promised for Y 2022, $2.4-B is huge. But it’s also believable. The question is not whether Ferrari can do it the question is how it does it, and whether there is any collateral damage to the brand. Again, Ferrari is the #1 brand in the worldwide automotive sector, and there is only 1#1.

 Ferrari is likely heading for 15,000 units. Ferrari is going to be a much bigger company than we had assumed even 12 months ago,”  Bernstein’s analysts said.

UBS is also impressed, saying Ferrari’s long-term earnings power is under-appreciated.

“The significant earnings opportunity for this brand was demonstrated again in Q-1 with the EBITDA margin,” the UBS analyst said.

“Short term volumes are sold out for most models in 2018 and management hopes to maintain positive price/mix through the year. This is ahead of our and market expectations for negative mix in the second half as volumes of LaFerrari Aperta roll off. This positive outlook will continue to drive margin expansion,” she said.

Morgan Stanley cautions; Ferrari cannot escape some cyclical economic risks as sales boom, and the huge capital spending required to embrace new technology and the new FUV may be higher for longer than some investors expect.

“We believe investors may be underestimating the disruption to profitability for hedging Ferrari’s model line-up towards electrified offerings, including potentially a fully electric car. Like other auto companies, Ferrari is not completely immune to the need to spend big up-front money in capex , R&D and higher variable costs on electric power-trains,” said the Morgan Stanley analyst

Despite all the good news, these analysts hesitate to predict an even higher share price.

“The stock performance has been epic. Even if Ferrari is set to double earnings, surely that’s priced in at the current market capitalization,” one said

Investors in the iconic Italian Supercar maker are waiting for next big event on Ferrari’s calendar, that being a meeting in mid-September to unveil the company’s 5-year plan.

Ferrari is a much bigger branded luxury company than The Street thought possible. I am calling the sock at 200 long term as the production will 2X in then next 5 years, the demand is there.

Symbol Last Trade Date Change Open High Low Volume
NYSE:RACE 132.82 22 May 2018 -1.25 133.91 134.24 132.56 117,004
HeffX-LTN Analysis for RACE: Overall Short Intermediate Long
Bullish (0.32) Neutral (0.20) Neutral (0.23) Very Bullish (0.54)

Stay tuned…

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