Ferrari leaves competitors eating its dust as earnings and exclusivity drive performance
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Ferrari leaves competitors eating its dust as earnings and exclusivity drive performance

Ferrari’s share price surged by 11% at the end of last week, as investors reacted positively to the brand’s forecast of a jump in profit this year. CEO Louis Camilleri said he might raise financial targets for 2020, based on Ferrari’s prediction that this year could see growth in core earnings of as much as 10%. What’s driving this growth? New models and special editions, both of which benefit from the incredible exclusivity of Ferrari’s brand, and the pricing power that implies.

Ferrari’s share price has had an incredible run so far this year, appreciating by almost 30%!

graph 04 ferrari

Source: Yahoo Finance

Last week, Ferrari reported earnings for 2018. The company said revenues rose by 3.5% on a constant currency, year on year, basis. Although positive, Ferrari said its revenue growth would have been higher if it wasn’t dragged down by fewer Maserati engine deliveries. Volume growth over the 12-month period came in at 10%. EBITDA was up by 8% and profit rose 20%, both reported year on year, and free cash flows increased by 23% against 2017.

Camilleri said he was “very bullish” on the future, with five new models and a Maserati SUV in the works. Beyond 2022, he added that a fully electric car may well be forthcoming. He also claimed that the luxury carmaker would continue with its exclusivity strategy, focussing on margins, rather than volumes.

Discussing Ferrari’s on-going performance in relation to the wider world, Camilleri struck a confident tone, saying: “While we would never claim to be totally immune to what is going on in the world, we are remarkably resilient. We continue to hold a strong order book and our order intake is firmly in line with our expectations.”

Key to the continued strength of that order book, Ferrari says, are the five new models it’s releasing. A final quote on that from Camilleri: “These models don’t only allow us to penetrate exciting new segments but also provide opportunity to leverage our pricing power.”

Disclosure

Dominion holds Ferrari in its Global Trends Luxury Fund.


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