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Category: Ferrari (RACE)
Date: 5 November 2020 Stock price of Ferrari: $202.20 We take a look at the 3rd quarter 2020 earnings report of Ferrari, iconic Italian supercar builder. For the quarter the group reported revenues of $1.04 billion and net income of $200 million. Vehicle deliveries for the quarter is down almost -7% compared to the same period of the previous year.
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Shipments totaled 2,313 units in the third quarter of 2020, down 161 units or 6.5% versus prior year, driven by the cadence of the Company’s full year production plan, which projects a recovery of 500 units out of the 2,000 lost following the seven-week production suspension due to the Covid-19 pandemic "
More About Ferrari
Ferrari is among the world’s leading luxury brands. The activities of Ferrari N.V. and its subsidiaries are focused on the design, engineering, production and sale of luxury performance sports cars. The cars are designed, engineered and produced in Maranello and Modena, Italy and sold in more than 60 markets worldwide through a network of 167 authorized dealers operating 187 points of sale. The Ferrari brand is licensed to a selected number of producers and retailers of luxury and lifestyle goods, with Ferrari branded merchandise also sold through a network of 18 Ferrari-owned stores and 17 franchised stores (including 13 Ferrari Store Junior), as well as on the Group’s website. To facilitate the sale of new and pre-owned cars, the Group provides various forms of financing to clients and dealers, including through cooperations and other agreements. Ferrari also participates in the Formula 1 World Championship through Scuderia Ferrari. The activities of Scuderia Ferrari are a core element of Ferrari’s marketing and promotional activities and an important source of innovation supporting the technological advancement of Ferrari sport and street cars
Overview of Ferrari's 3rd quarter 2020 earnings report
The numbers below refers to some of the financial and other highlights of Ferrari's 3rd quarter 2020
- Total shipments of 2,313 units, down by 161 units versus prior year, driven by production cadence
- Net revenues of Euro 888 million, decreased by 3.0% with core business revenues up 2.6% driven by the deliveries of the Ferrari Monza SP1 and SP2
- EBITDA of Euro 330 million, up 6.4% versus prior year, with an EBITDA margin of 37.2%, up 330 basis points due to favorable mix / price and cost containment measures
- EBIT of Euro 222 million essentially in line with prior year, with an EBIT margin of 25.0%
- Positive Industrial free cash flow generation of Euro 77 million
Ferrari management commentary on their 3rd quarter 2020 earnings
Maranello (Italy), November 3, 2020 – Ferrari N.V. (NYSE/MTA: RACE) (“Ferrari” or the “Company”) today announces its consolidated preliminary results(3) for the third quarter and nine months ended September 30, 2020.
Shipments totaled 2,313 units in the third quarter of 2020, down 161 units or 6.5% versus prior year, driven by the cadence of the Company’s full year production plan, which projects a recovery of 500 units out of the 2,000 lost following the seven-week production suspension due to the Covid-19 pandemic. Sales of 8 cylinder models (V8) were down 12.8% while the 12 cylinder models (V12) increased by 15.4%. The F8 Spider and the 812 GTS are in the ramp up phase reaching mainly EMEA, gradually offsetting the 488 Pista family and the Ferrari Portofino which have essentially reached the end of their lifecycle. The Ferrari Monza SP1 and SP2 continue to be delivered as originally scheduled. Deliveries of the SF90 Stradale and the Ferrari Roma are on track to start in Q4 2020.
Quarterly shipments were affected by the deliberate geographic allocations driven by the phase-in pace of individual models. As a result, EMEA increased by 12.7%, Americas was down by 34.7%, Mainland China, Hong Kong and Taiwan posted a decrease of 25.2%, while Rest of APAC was in line with prior year.
Net revenues for the third quarter of 2020 were Euro 888 million, down 3.2% at constant currency(1). The growth of revenues in Cars and spare parts to Euro 727 million (up 2.6% or 2.4% at constant currency(1)) reflected the positive mix thanks to the Ferrari Monza SP1 and SP2, partially offset by lower volume mostly due to the phase-out of the 488 Pista family, which also implies a lower contribution from personalizations, as well as the Ferrari Portofino reaching the end of its lifecycle. Engines revenues (Euro 44 million, down 4.4% also at constant currency) were substantially in line with prior year. Sponsorship, commercial and brand revenues (Euro 93 million, down 30.9% or 31.8% at constant currency) were significantly impacted by the Covid-19 pandemic resulting in a reduced number of Formula 1 races and corresponding lower revenue accrual – albeit improved in the quarter based on updated estimates – as well as reduced in-store traffic and museum visitors.
Shipments totaled 2,313 units in the third quarter of 2020, down 161 units or 6.5% versus prior year, driven by the cadence of the Company’s full year production plan, which projects a recovery of 500 units out of the 2,000 lost following the seven-week production suspension due to the Covid-19 pandemic. Sales of 8 cylinder models (V8) were down 12.8% while the 12 cylinder models (V12) increased by 15.4%. The F8 Spider and the 812 GTS are in the ramp up phase reaching mainly EMEA, gradually offsetting the 488 Pista family and the Ferrari Portofino which have essentially reached the end of their lifecycle. The Ferrari Monza SP1 and SP2 continue to be delivered as originally scheduled. Deliveries of the SF90 Stradale and the Ferrari Roma are on track to start in Q4 2020.
Quarterly shipments were affected by the deliberate geographic allocations driven by the phase-in pace of individual models. As a result, EMEA increased by 12.7%, Americas was down by 34.7%, Mainland China, Hong Kong and Taiwan posted a decrease of 25.2%, while Rest of APAC was in line with prior year.
Net revenues for the third quarter of 2020 were Euro 888 million, down 3.2% at constant currency(1). The growth of revenues in Cars and spare parts to Euro 727 million (up 2.6% or 2.4% at constant currency(1)) reflected the positive mix thanks to the Ferrari Monza SP1 and SP2, partially offset by lower volume mostly due to the phase-out of the 488 Pista family, which also implies a lower contribution from personalizations, as well as the Ferrari Portofino reaching the end of its lifecycle. Engines revenues (Euro 44 million, down 4.4% also at constant currency) were substantially in line with prior year. Sponsorship, commercial and brand revenues (Euro 93 million, down 30.9% or 31.8% at constant currency) were significantly impacted by the Covid-19 pandemic resulting in a reduced number of Formula 1 races and corresponding lower revenue accrual – albeit improved in the quarter based on updated estimates – as well as reduced in-store traffic and museum visitors.
EBITDA( and EBIT
Q3 2020 EBITDA(1) grew by 6.4% or 4.7% at constant currency(1) versus prior year, reaching Euro 330 million with an EBITDA margin(1) of 37.2%, up 330 basis points versus prior year.
Q3 2020 EBIT was Euro 222 million, essentially in line with prior year (-2.1% or -4.1% at constant currency(1)). Volumes had a negative impact (Euro 19 million), while the Mix / price variance (Euro 46 million) performance was positive thanks to the Ferrari Monza SP1 and SP2, partially offset by the lower contribution from personalization programs due to the decrease of shipments and the gradual phase-out of the 488 Pista family. Industrial costs / research and development costs decreased (Euro 5 million) due to spending cadence in Formula 1 racing activities, partially compensated by higher depreciation and amortization of fixed assets. SG&A decreased (Euro 18 million) reflecting fewer marketing initiatives, as well as cost containment actions. Other decreased (Euro 60 million) due to the Covid-19 impact on the Formula 1 racing calendar, as well as lower traffic for brand-related activities.
Financial charges in the quarter stood at Euro 14 million versus Euro 16 million for the prior year, which reflected the impact of the early refinancing of a portion of debt. The tax rate in the quarter was 18%, mainly attributable to the benefit of the Patent Box, deductions for eligible research and development costs and the hyper and super-depreciation of fixed assets in accordance with current tax regulations in Italy.
As a result of the items described above, the Net Profit for the period was Euro 171 million, reflecting a slight increase versus prior year, and the Diluted earnings per share for the quarter reached Euro 92 cents, compared to Euro 90 cents in the corresponding prior year period. Industrial free cash flow for the quarter was Euro 77 million, driven by the growth in EBITDA(1), partially offset by capital expenditures of Euro 158 million and an adverse working capital impact due primarily to higher raw material and component inventories as well as the reversal of the Ferrari Monza SP1 and SP2 advances received in 2019.
Net Industrial Debt as of September 30, 2020, was Euro 715 million, compared to Euro 776 million as of June 30, 2020. Lease liabilities per IFRS 16 as of September 30, 2020, were Euro 68 million. As of September 30, 2020, total available liquidity was Euro 1,879 million (Euro 1,812 million as of June 30, 2020), including undrawn committed credit lines of Euro 700 million.
Q3 2020 EBITDA(1) grew by 6.4% or 4.7% at constant currency(1) versus prior year, reaching Euro 330 million with an EBITDA margin(1) of 37.2%, up 330 basis points versus prior year.
Q3 2020 EBIT was Euro 222 million, essentially in line with prior year (-2.1% or -4.1% at constant currency(1)). Volumes had a negative impact (Euro 19 million), while the Mix / price variance (Euro 46 million) performance was positive thanks to the Ferrari Monza SP1 and SP2, partially offset by the lower contribution from personalization programs due to the decrease of shipments and the gradual phase-out of the 488 Pista family. Industrial costs / research and development costs decreased (Euro 5 million) due to spending cadence in Formula 1 racing activities, partially compensated by higher depreciation and amortization of fixed assets. SG&A decreased (Euro 18 million) reflecting fewer marketing initiatives, as well as cost containment actions. Other decreased (Euro 60 million) due to the Covid-19 impact on the Formula 1 racing calendar, as well as lower traffic for brand-related activities.
Financial charges in the quarter stood at Euro 14 million versus Euro 16 million for the prior year, which reflected the impact of the early refinancing of a portion of debt. The tax rate in the quarter was 18%, mainly attributable to the benefit of the Patent Box, deductions for eligible research and development costs and the hyper and super-depreciation of fixed assets in accordance with current tax regulations in Italy.
As a result of the items described above, the Net Profit for the period was Euro 171 million, reflecting a slight increase versus prior year, and the Diluted earnings per share for the quarter reached Euro 92 cents, compared to Euro 90 cents in the corresponding prior year period. Industrial free cash flow for the quarter was Euro 77 million, driven by the growth in EBITDA(1), partially offset by capital expenditures of Euro 158 million and an adverse working capital impact due primarily to higher raw material and component inventories as well as the reversal of the Ferrari Monza SP1 and SP2 advances received in 2019.
Net Industrial Debt as of September 30, 2020, was Euro 715 million, compared to Euro 776 million as of June 30, 2020. Lease liabilities per IFRS 16 as of September 30, 2020, were Euro 68 million. As of September 30, 2020, total available liquidity was Euro 1,879 million (Euro 1,812 million as of June 30, 2020), including undrawn committed credit lines of Euro 700 million.
Ferrari (RACE) stock price history over the last 5 years
The image below, obtained from Google shows the stock price history of Ferrari (RACE) over the last 5 years (in US $). And it's been a very good time for Ferrari stockholders over the last 5 years. 5 years ago the stock was trading at $52.40 and its currently trading at $202.20. That's a very strong 285.8% provided to Ferrari stockholders over the last 5 years.
Ferrari (RACE) stock vs BMW (BMW) stock performance over the last 5 years
The image below shows the stock price history of Ferrari (RACE) and BMW (BMW) over the last 5 years. In this comparison we take a look at the stock of Ferrari (as listed on the Italian stock exchange) and BMW (as listed on the Frankfurt stock exchange) and the returns and stock prices is in Euro's for this comparison
- Ferrari (RACE): 285.8%
- BMW: -39.3%
Latest stock valuation of Ferrari (RACE)
Based on the 3rd quarter 2020 earnings report of Ferrari what do we value the group's stock at? Based on their earnings reported and their outlook our stock valuation model provides a target price (full value price) for Ferrari at $161.50 a stock. We therefore believe the stock of Ferrari is overvalued at its current price.
We usually recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price which in this case is $161.50. A good entry point into the stock of Ferrari (RACE) would therefore be at $145.40 or below.
Since the stock of Ferrari is trading at well above our suggested entry point into the stock we rate the stock of Ferrari as a sell
We usually recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price which in this case is $161.50. A good entry point into the stock of Ferrari (RACE) would therefore be at $145.40 or below.
Since the stock of Ferrari is trading at well above our suggested entry point into the stock we rate the stock of Ferrari as a sell
Next earnings release of Ferrari (RACE)
It is expected that Ferrari (RACE) will release their 4th quarter 2020 earnings report in early February 2021
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