What to Expect from Ferrari in 2016
The Future of Ferrari: Reading the 4Q15 Earnings and 2016 Guidance
Ferrari’s shipment growth
As we discussed earlier in this series, Ferrari (RACE) has a reputation of limiting its production and shipments to maintain exclusivity. With 2016 rolling in, let’s take a look at the company’s 2016 guidance and the factors that may continue to drive its growth.
According to the company guidance for 2016, it plans to increase its car shipments by 3.1% to ~7,900 units. Note that in 2015, the company suggested that it plans to increase its shipments to ~9,000 per year by the end of 2019. Therefore, we should not expect a sudden rise in company’s shipments. This exclusivity plan also provides excellent pricing power to Ferrari.
Revenue growth in 2016
The company expects its 2016 revenues to be more than 2.9 billion euros, or about $3.2 billion. This represents a revenue growth of just 1.6% and is marginally lower than analyst estimates of 2.96 billion euros, or about $3.3 billion.
The company explains that this moderate growth will come from a recent shift in demand from V12 to C8 engine cars. Cars with V8 engines are typically priced lower than the V12 engine cars, and the production of the company’s limited edition supercar, LaFerrari, is also expected to be completed in 1Q16. Additionally, shipments of its new, limited edition F12tdfs should positively impact the company’s revenue growth in 2016.
EBITDA growth
According to the company’s guidance, Ferrari’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) is likely to grow by ~3% to 770 million euros, or about $857.8 million, which is lower than the analyst estimates of more than 800 million euros, or $891.2 million. This guidance represents adjusted EBITDA margins of ~27% in 2016, and the completion of the LaFerrari limited edition along with higher shipments of V8 engine cars appear to be the main drivers of moderate EBITDA growth.
Scuderia Ferrari in 2016
Over the past year, Ferrari’s Formula One racing team, Scuderia Ferrari, has managed to register a few achievements. The team emerged as the closest challenger to Mercedes and finished second in the 2015 Constructor Championship. The company has high hopes for the team’s 2016 performance, and Chairman Sergio Marchionne has even said that its “efforts are in the direction of Formula One team is doing well,” adding that it is “getting ready now for the trial of the cars in the month of February.”
One core factor behind Ferrari’s extremely strong brand image is associated with the success of Scuderia Ferrari. Being the owner of the most successful motorsport racing team gives Ferrari an edge over its competitors and also affects the company’s excellent pricing power. We should remember that Ferrari sells its cars at a higher premium that seems unachievable for other automakers (XLY) like General Motors Company (GM), Ford Motor Company (F) and Toyota Motor Corporation (TM).
In the next and final part of this series, we’ll discuss Ferrari’s valuation multiple and what it means.
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