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Why Ferrari's Shares Surged 27% in January

John Rosevear, The Motley Fool

What happened

Shares of Italian luxury sports-and-racing-car maker Ferrari (NYSE: RACE) began 2019 with a banner month. According to data from S&P Global Market Intelligence, Ferrari's shares rose just over 27% in January, handily outpacing the S&P 500 Index's 7.87% gain.

RACE Chart

RACE data by YCharts.

Some of that increase was simply a recovery from the broad-based market sell-off in December, when Ferrari's shares fell 9%. But Ferrari's shares surged on the last day of January, after a strong earnings report. 

So what

Ferrari reported its fourth-quarter and full-year 2018 results on Jan. 31, and they were good. Ferrari's operating income rose 6% in 2018 on a 10.2% increase in worldwide shipments, and a tax break in its native Italy gave its after-tax income a big boost. 

There were a few important takeaways for Ferrari investors in the report beyond the headline numbers:

  • Ferrari's fat 23.1% fourth-quarter operating margin was unchanged from the year-ago period, despite the end of production of the super-profitable limited-run LaFerrari Aperta hypercar.
  • Worldwide demand for the V12-powered 812 Superfast remained very strong a year after the model's debut.
  • While some Western luxury brands saw sales in China drop sharply in the fourth quarter, Ferrari didn't. Ferrari's deliveries in China, Hong Kong, and Taiwan were up a combined 6% for the quarter, 13% for the year.
A silver Ferrari GTC4Lusso, a four-passenger luxury-sports car powered by a V12 engine.

Strong global demand for Ferrari's high-profit V12-powered models helped keep its margin strong in the fourth quarter. Image source: Ferrari.

Now what

During its earnings call, Ferrari executives noted that the company will launch five new models in 2019 and gave upbeat guidance for the year. It anticipates that those new models, as well as continued demand for its high-margin V12-powered cars, will lift its revenue, earnings, operating margin, and cash flow for the year above 2018's strong results. 

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John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.