Analyzing Ferrari’s Progress toward Its 2018 Guidance



Ferrari’s 1Q18 earnings

So far in this series, we’ve covered Ferrari’s (RACE) 1Q18 shipments to key markets, revenues, and profit margins. Last year, the company’s shipments remained well above the 8,000 psychological mark and stood firm at 8,398 car units, compared to 8,014 in 2016. Ferrari’s global shipments grew 6.2% YoY (year-over-year). These higher shipments, along with a positive product mix, helped the company report higher annual revenues and expanded its profit margins last quarter. Now let’s move on by reviewing Ferrari’s progress toward its 2018 guidance.

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On track to meet shipments guidance

In February 2018, Ferrari management gave guidance that the company would ship more than 9,000 car units globally, about 7.2% higher than its shipments of 8,398 units in 2017. The company has already shipped 2,128 units in the first quarter. Now it needs to ship 6,872 car units in the remaining three quarters of 2018, up 7.5% from its 6,395 units shipped in the final three quarters of 2017.

After seeing 1Q18 shipments growth, Ferrari’s management reiterated its 2018 shipments and revenue guidance during its recent earnings event. The company expects its 2018 revenues to exceed 3.4 billion euros. Similarly, the company expects its 2018 adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) to be more than 1.1 billion euros, compared to 1.04 billion in 2017.

Debt reduction targets

In 1Q18, Ferrari’s net industrial debt reduced by 60 million euros or ~$71 million from the previous quarter to 413 million euros or ~490 million. Earlier this year, RACE’s management said it expects to be able to reduce the company’s net industrial debt to below 400 million euros by the end of 2018. Management expects to make Ferrari net-debt-free by no later than 2021.

As a luxury carmaker, Ferrari strives to impress target consumers with its advanced vehicle designs and power. The company maintains exclusivity by producing cars in low volume with high margins. This strategy differentiates Ferrari’s business model from other automakers (FXD), including General Motors (GM), Ford (F), and Fiat Chrysler (FCAU).

In the next part of this series, we’ll see how Ferrari’s valuation multiples look after the 1Q18 earnings results.


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