Morningstar | Ferrari Posts Another Record Year; EUR 62 FVE Maintained
Wide-moat-rated Ferrari, Formula 1 racer and maker of ultraluxury and exotic sports cars, reported earnings per share before special items of EUR 3.40, EUR 0.20 better than the sell-side consensus, and EUR 0.58 higher than the year-ago EPS result. Revenue was just 0.1% higher at EUR 3.4 billion on a 10% increase in unit volume, while EBITDA grew 8% to EUR 1.114 billion for margin expansion of 230 basis points to an impressive 32.6% versus the prior year. Excluding negative currency translation, revenue would have been 3.2% higher.We have consistently reminded investors that, like the rich heritage of the Ferrari brand, we think Ferrari stock will regularly trade at a rich, luxury-goods-type valuation, owing to its wide economic moat. Unfortunately, the 1-star-rated shares trade at a steep 75% premium to our EUR 62 fair value estimate. While we would not be averse to paying-up for a wide-moat company like Ferrari, we view this stock as too overvalued relative to our forecast for Ferrari’s healthy cash flow generation and superior returns on invested capital.
Shipments grew by 10.2% compared with 2017. Weaker revenue growth versus the volume increase resulted from a 23.8% year over year drop in revenues from engines sold to Maserati, in addition to the negative 3.1 percentage points impact from currency. In 2017, Maserati's launch of the all-new Levante SUV was in full-swing, which created a challenging comparison to the year ago period. Also, 2017 included sales of the LaFerrari hypercar, which finished its series run earlier in 2018.
Management’s 2019 guidance includes record revenue in excess of EUR 3.5 billion compared with EUR 3.4 billion in revenue 2018. Management did not provide unit volume guidance this year. The company guides 2019 adjusted EBITDA (before special items) to increase by 10% to a range of EUR 1.20 billion to EUR 1.25 billion. We currently estimate 2019 revenue at EUR 3.42 billion, 9,091 units, and EUR 1.112 billion, respectively.
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Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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