Italian supercar maker Ferrari (NYSE:RACE) will report its second-quarter earnings results on Wednesday, August 1. Here's a preview.
Wall Street expects Ferrari's profit to jump 12%
Wall Street analysts polled by Thomson Reuters expect Ferrari to report earnings of 0.81 euros per share, on average, up from 0.72 euros per share in the second quarter of 2017. They expect revenue of 925.94 million euros, up from 920 million euros a year ago.
A seismic change: Ferrari has a new CEO
Board member Louis Camilleri, a former CEO of Philip Morris International (NYSE:PM), has taken the helm of the storied exotic carmaker. Camilleri succeeds the late Sergio Marchionne, an industry legend who was also the CEO of Fiat Chrysler Automobiles (NYSE:FCAU) until falling gravely ill. (Philip Morris International is a longtime sponsor of Ferrari's racing team.)
It's a seismic change. Marchionne was not only the architect of the merger of Fiat and Chrysler, he was also the mastermind behind Ferrari's spinoff and success as a public company.
Ferrari stock soared under Marchionne's leadership after he plotted a clear path to profit growth over the next several years. It remains to be seen how -- or if -- Camilleri will change the profit-growth plan Marchionne put in place. We'll hear from him for the first time as Ferrari's CEO when the company reports its second-quarter earnings result on Wednesday, August 1, 2018.
What we know about Ferrari's second quarter
Ferrari doesn't release official sales data except with its earnings reports, so we'll have to wait until August 1 to know for sure how its sales fared in the second quarter. We do have Automotive News estimates, which suggest that Ferrari's U.S. sales were steady in the second quarter, up about 1% from a year ago, and we know that Marchionne said in May that waiting lists were very long.
Ferrari has two new models, both of which have received strong reviews. The 812 Superfast, a V12-powered two-seater introduced late last year, succeeds (and outperforms) the F12 Berlinetta at the top of Ferrari's regular model range. The second new model is the Portofino, a V8-powered convertible. It succeeds the California, Ferrari's best-selling car ever, in its role as the "entry-level" Ferrari.
Demand for both appears to be high. Both sell at higher prices than their predecessors, and that should be good news for Ferrari's margins. Ferrari's adjusted EBIT margin in the first quarter was an outstanding 25.3%; the company credited the early success of the 812 Superfast for the jump in profitability.
We also know that Ferrari is having a good year on the race track, something that's more important for Ferrari than it is for just about any other automaker. While road cars generate the bulk of Ferrari's revenue, Ferrari is small enough -- and its Formula 1 racing is big enough -- that racing is an important source of both revenue and prestige for the company.
Ferrari's team, Scuderia Ferrari, is one of the world's most widely followed sports teams. Not only is it a powerful marketing tool for Ferrari's road cars and its brand, its place in the championship standings is directly correlated to its racing revenue. The takeaway for investors: Success on the track translates to Ferrari's bottom line in more ways than one.
So, how is Scuderia Ferrari doing this season? Right now, Ferrari's drivers are second and third in the individual drivers' standings. The team is in second place in the constructors' standings, locked in a fierce battle with leader Mercedes-Benz. Ferrari's lead driver, Sebastian Vettel, has won 4 of the 12 races so far this season. He placed second in this past weekend's Hungarian Grand Prix, behind Mercedes-Benz's Lewis Hamilton. Ferrari's second driver, Kimi Raikkonen, was third.
Ferrari earnings: What this Fool expects
I think it's a safe bet that Ferrari will match or beat analysts' estimates on continued strong demand for the Superfast and good early sales of the Portofino. The company's full-year guidance calls for sales, revenue, and adjusted EBITDA all to exceed the excellent results it posted in 2017; it should be well on track toward that goal.
I'm less certain that it will match the outstanding EBIT margin it posted in the first quarter. Ferrari's margin was up on a very strong "mix" of products sold, but that was a one-time thing: Sales of the (very high-margin) 812 Superfast were outstanding, while shipments of the (somewhat lower-margin) entry-level V8 model were zero -- the outgoing California had ceased production, and Ferrari had not yet started building its successor, the Portofino.
With the Portofino in production in the second quarter, Ferrari's mix and margin might be a bit less outstanding than what we saw earlier in the year. Still, I expect its margin will still be strong -- solidly over 20% -- and the company's overall performance should be quite good. We'll find out for sure on Wednesday.