Morningstar | Ferrari's 1Q Results Impress, 2019 Guidance Confirmed; Maintain EUR 70 FVE
Wide-moat-rated Ferrari, Formula One racer and maker of ultraluxury and exotic sports cars, reported first-quarter diluted earnings per share of EUR 0.95, EUR 0.16 better than the sell-side consensus and EUR 0.17 higher than the year-ago result. Revenue was just 13.1% higher at EUR 940 million on a 22.7% increase in unit volume, while EBITDA grew 14.1% to EUR 311 million for margin expansion of 30 basis points to an impressive 33.1% versus the prior year. Excluding favorable currency translation, revenue would have been 11.1% higher.We have consistently reminded investors that we think Ferrari stock will regularly trade at a rich, luxury-goods-type valuation, owing to its wide economic moat. Currently, the 1-star-rated shares trade at a steep 76% premium to our EUR 70 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 the automaker's healthy cash flow generation and superior returns on invested capital.
Management’s 2019 guidance includes record revenue in excess of EUR 3.5 billion compared with EUR 3.4 billion in 2018. Management has not provided unit volume guidance this year. The company guides 2019 adjusted EBITDA (before special items) to increase by 10% to a EUR 1.20 billion-1.25 billion. We currently estimate 2019 revenue at EUR 3.66 billion, 9,808 units, and EBITDA of EUR 1.25 billion.
Shipments grew 22.7% compared with the first quarter of 2018 with China posting an 86.2% jump due to delivery acceleration in anticipation of new emission regulations being implemented. Management expects comparatively lower volume in the region for the second half. Weaker organic revenue growth of 11.1% versus the volume increase resulted from a 24.7% year-over-year drop in revenue from engines sold to Maserati. Management expects that Maserati engine shipments will be completely discontinued sometime between 2020 and 2021.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
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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