Earnings Call: Ferrari Reports Strong Q3 Revenue and Profit Growth

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Earnings Call: Ferrari Reports Strong Q3 Revenue and Profit Growth

Italian luxury sports car manufacturer Ferrari N.V. (RACE) delivered a strong performance in the third quarter of 2024, showcasing significant revenue growth and profitability. The company's revenues increased by 7% year-on-year to reach €1.6 billion, while net profit climbed to €375 million.

The robust financial results were supported by healthy order intake for the new 12Cilindri coupe Spider and the limited F80 supercar, with only 799 units. Ferrari's commitment to sustainability was also highlighted by the early closure of a natural gas-powered manufacturing facility contributing to carbon neutrality goals. With a secure outlook for the remainder of the year, Ferrari remains optimistic about meeting its 2024 targets, backed by strong market demand and a solid order book.

Key Highlights:

  • Ferrari's third-quarter revenue rose by 7% to €1.6 billion, with EBITDA at €470 million.
  • Net profit reached €375 million, while industrial free cash flow exceeded €360 million.
  • Robust order intake for the 12Cilindri coupe Spider and the forthcoming F80 supercar with 1,200 horsepower.
  • Ferrari celebrated two F1 championship victories and made progress in sustainability efforts by closing a natural gas facility early.
  • The company maintains confidence in its full-year guidance supported by a strong order book and high customer engagement.

Company Outlook: Ferrari is optimistic about meeting its 2024 targets due to strong order intake and high customer participation in events. Deliveries of the F80 supercar are expected to begin in the fourth quarter of 2025, with a focus on revenue quality rather than volume. Ferrari aims to achieve a 60% reduction in CO2 emissions by 2030 in line with its carbon neutrality goals.

Negative Takeaways:

  • Concerns were raised regarding the residual values of certain models, particularly in the UK market, necessitating continuous monitoring.
  • A sequential decline in EBITDA is projected in the fourth quarter due to higher operating expenses and inflation.
  • SG&A expenses are on the rise due to investments in digital infrastructure and may continue to increase.

Positive Takeaways:

  • The company reported a strong EBITDA margin of 38.8% and an EBITDA margin of 28.4%.
  • The increase in customization, contributing to 20% of total revenues, helped offset the impact of lower volumes.
  • Models like the Purosangue and Daytona SP3 significantly supported revenue growth.

Shortcomings:

  • A nearly 36% year-on-year decline in industrial free cash flow is expected in the fourth quarter due to increased capital expenditures and higher taxes.
  • The company is facing a deliberate decrease in unit sales due to temporary production halts from ERP system transitions.

Q&A Highlights:

  • Management addressed the €10 million impact of F1-related releases and their effect on operations.
  • Concerns regarding potential U.S. tariffs and their impact on the order book were discussed, with the effects remaining uncertain.
  • The increase in R&D capitalization was associated with consistent innovation spending and is expected to grow.

In summary, Ferrari's third-quarter achievements reflect a company adept at navigating economic challenges through strategic focus and operational efficiency. The combination of a strong brand, innovative technology, and a commitment to sustainability positions Ferrari well for continued success in the luxury automotive market.

InvestingPro Forecasts: Ferrari's strong performance in the third quarter of 2024 is further supported by significant financial metrics and forecasts from InvestingPro. The company's market capitalization impressively stands at $78.87 billion, reflecting its strong position in the luxury automotive sector.

InvestingPro data indicates that Ferrari's revenue growth remains robust; a 15.28% increase was recorded over the past twelve months as of the second quarter of 2024, aligning with the reported 7% annual revenue growth in the third quarter. This consistent growth trajectory highlights the company's ability to sustain strong demand for high-end vehicles, including the new 12Cilindri coupe Spider and the anticipated F80 supercar.

The company's profitability is equally impressive, reporting a gross profit margin of 49.77% and an operating income margin of 27.38% for the last twelve months. These figures underscore Ferrari's ability to command premium prices and maintain operational efficiency, contributing to its strong financial performance.

One InvestingPro tip reveals that Ferrari has increased its dividend for three consecutive years, consistent with the company’s reported financial strength and positive outlook. This trend in dividend growth, coupled with a 0.56% dividend yield, demonstrates Ferrari's commitment to returning value to shareholders while investing in future growth.

Another relevant InvestingPro tip indicates that Ferrari operates with a moderately leveraged balance sheet. This prudent financial management is consistent with the reported industrial free cash flow exceeding €360 million, providing flexibility for investments in new models and sustainability initiatives.

For investors seeking a deeper understanding of Ferrari's financial health and future prospects, InvestingPro offers 11 additional insights that can provide valuable information about the company's investment potential.