Model Updates & Takeaways From the Ferrari Results
Author: John Moschella CFA, CPA Published: February 2, 2016 at 6:00pm Category: Earnings Review
We have updated our Ferrari (NYSE:RACE) Earnings & Valuation Model to include today’s results and management’s latest guidance. Here are a few of the items we considered in our updates:
1) Revenue & Shipments: We held quarterly growth rates of Sponsorship and Other Revenue constant through 2016, and included a stabilization of engine sales in the back-half of 2016 (as mentioned on today’s call). The guidance management gave for revenue and shipments implies a decline in the average selling price per vehicle shipped of about 4% in 2016. This could be due in part to the timing of La Ferrari shipments last year (499 total vehicles spread-out between 2014 and 2015), and F12 TDF shipment expectations next year (799 vehicles expected to ship in 2016 and 2017). We have updated our model to meet management’s overall revenue expectations.
2) Operating Margin: Management mentioned that R&D costs would stabilize over time. We have reflected an improvement in our estimates in the second half of 2016. With adjusted EBITDA reaching management’s guidance of €770M by the end of the year.
3) Non-GAAP EPS: The company did not disclose non-GAAP EPS; However, €24M in IPO & separation costs were recognized during the fourth quarter and backed out of EBIT and EBITDA. We showed the impact of these items net of tax to arrive at a final non-GAAP EPS estimate of $0.37 per share in our model.
Impact on Valuation & Earnings Estimates:
Our resulting Next-Twelve Month (NTM) non-GAAP EPS estimate is €1.61, or $1.47, and our new price target estimate, based on the three-month average NTM PE ratio of 36x (excluding the value of net debt per share) is $39. Keep in mind that Ferrari is a newly public company. As a result the valuation is subject to a high level of volatility, and the PE multiple will likely change significantly over the course of the year. Our updated model including today’s results has been published on our model page. Feel free to download it and plug in your own estimates.
Sources: Company reports, SEC filings, and investor presentations.
1) Revenue & Shipments: We held quarterly growth rates of Sponsorship and Other Revenue constant through 2016, and included a stabilization of engine sales in the back-half of 2016 (as mentioned on today’s call). The guidance management gave for revenue and shipments implies a decline in the average selling price per vehicle shipped of about 4% in 2016. This could be due in part to the timing of La Ferrari shipments last year (499 total vehicles spread-out between 2014 and 2015), and F12 TDF shipment expectations next year (799 vehicles expected to ship in 2016 and 2017). We have updated our model to meet management’s overall revenue expectations.
2) Operating Margin: Management mentioned that R&D costs would stabilize over time. We have reflected an improvement in our estimates in the second half of 2016. With adjusted EBITDA reaching management’s guidance of €770M by the end of the year.
3) Non-GAAP EPS: The company did not disclose non-GAAP EPS; However, €24M in IPO & separation costs were recognized during the fourth quarter and backed out of EBIT and EBITDA. We showed the impact of these items net of tax to arrive at a final non-GAAP EPS estimate of $0.37 per share in our model.
Impact on Valuation & Earnings Estimates:
Our resulting Next-Twelve Month (NTM) non-GAAP EPS estimate is €1.61, or $1.47, and our new price target estimate, based on the three-month average NTM PE ratio of 36x (excluding the value of net debt per share) is $39. Keep in mind that Ferrari is a newly public company. As a result the valuation is subject to a high level of volatility, and the PE multiple will likely change significantly over the course of the year. Our updated model including today’s results has been published on our model page. Feel free to download it and plug in your own estimates.
Sources: Company reports, SEC filings, and investor presentations.
