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Bull of the Day: Ferrari (RACE)

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Headquartered in Maranello, Italy, Ferrari NV (RACE - Free Report) designs, manufactures, and sells sports cars, like the 488 Spider, the 488 GTB, and the 812 Superfast. Ferrari operates throughout Europe, the Americas, the Middle East, India, Africa, Greater China, and in the Asia-Pacific region.

Shares Surge on Strong Q4 & Fiscal 2018 Earnings

Ferrari reported fourth-quarter adjusted EBITDA of €274 million ($314 million), which came in line with the analyst consensus and grew 6% year-over-year. Sales were up 1% from the prior year period to €845 million.

One thing that benefitted Ferrari was strong sales in models that had 12-cylinder engines, as these 12-cylinder cars are higher-priced and more profitable than those with an 8-cylinder engine.

Overall shipments jumped 10.2% in 2018, but 12-cylinder sales rose an impressive 19.6%; 8-cylinder sales only increased 7.3% in comparison.

Notably, deliveries in China, Hong Kong, and Taiwan were up a combined 6% for the fourth quarter and 13% for fiscal 2018. This is in contrast to some Western luxury brands that saw sales dip in Q4.

The company’s “net industrial debt” came to €340 million at the end of 2018, which was down from €473 million at the end of 2017. Industrial few cash flow hit €117 million, up 900% from Q4 2017.

Price Performance & Rising Estimates

Ferrari N.V. Price and Consensus

Ferrari N.V. Price and Consensus | Ferrari N.V. Quote

Over the past three months, RACE has gained almost 18%. January was a particularly good month for Ferrari, as the stock both bounced back nicely from the market pullback seen at the end of last year, and investors liked what they saw in its fourth-quarter report.

Estimates have been rising lately too, pushing the stock towards a Zacks Rank #1 (Strong Buy).

For the current fiscal year, four analysts have upped their earnings estimate, and the Zacks Consensus Estimate has moved 33 cents higher in the past 60 days from $3.71 to $4.04 per share.

Next year looks pretty strong too, with expected earnings growth of 9.5%. The consensus estimate sits at $4.43 per share, with three upward revisions in the last two months.

Bottom Line

In a conference call with analysts, CEO Louis Camilleri said that he was “very bullish” on Ferrari’s earnings as well as the sports car maker’s long-term outlook.

Camilleri also said that he is confident that mid-term targets provided last September would be met, despite a slew of macroeconomic issues. “While we would never claim to be totally immune to what is going on in the world, we are remarkably resilient,” he said to analysts. “We continue to hold a strong order book and our order intake is firmly in line with our expectations.”

For 2019, Ferrari expects adjusted EBITDA to fall in the range of €1.2 billion and €1.25 billion, reflecting 10% growth. Sales are projected to increase over 3% to more than €3.5 billion.

For those investors looking for an automaker to add to their portfolio, RACE should definitely be on the shortlist.

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