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Why Ferrari Could Exceed Its Strong Fiscal 2017 Guidance

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Ferrari’s 1Q17 earnings

So far in this series, we have covered Ferrari’s (RACE) 1Q17 shipments, revenues, and margins. The company’s shipments crossed the psychological mark of 2,000 units in 1Q17 and stood firm at 2,003 car units. 

These higher shipments, along with a positive product mix, helped Ferrari report higher annual revenues and expanded margins in the first quarter. Now, let’s see why Ferrari could easily exceed its fiscal 2017 guidance.

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Solid fiscal 2017 guidance

In February 2017, Ferrari (RACE) gave guidance to ship about 8,400 car units globally in fiscal 2017, about 5% higher than in fiscal 2016. In 1Q17, when automakers’ shipments typically tend to be weak, Ferrari reported a 6% increase in its global shipments.

Similarly, Ferrari’s 1Q17 revenues and adjusted EBITDA[1. earnings before interest, taxes, depreciation, and amortization] exceeded analysts’ estimates. With the company’s strong product portfolio, which has several V12-powered models, we don’t believe it would be a difficult task to achieve its fiscal 2017 guidance.

Being a luxury car manufacturer, Ferrari strives to impress its target consumers with its advanced, cutting-edge vehicle designs. The company wants to maintain its exclusivity by producing cars in low volumes with high margins. This strategy distinguishes Ferrari’s business model from other automakers (VCR) such as General Motors (GM), Ford (F), and Fiat Chrysler (FCAU).

Progress on reducing debt

At the end of 1Q17, Ferrari (RACE) reported net industrial debt of 578 million euros (~$635 million), which was lower than 653 million euros (~$704 million) at the end of 4Q16. With this, the company seems to be in line with its fiscal 2017 guidance of reducing its debt burden to ~500 billion euros (~$539 billion).

Overall, Ferrari’s 1Q17 progress reflects its ability to meet its fiscal 2017 guidance, which could maintain positive sentiment among its investors.

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