Get in the RACE with Ferrari

05/01/2019 5:00 am EST


Ned Piplovic

Assistant Editor, Eagle Financial Publications

With the exception of a brief share price pullback in the second half of 2018, Ferrari N.V. (RACE) has been hitting its stride on all cylinders and racing full throttle on the race tracks, as well as on the stock markets since its IPO in October 2015, notes Ned Piplovic, contributing editor to StockInvestor.

Headquartered in Maranello, Italy, and founded in 1947, Ferrari N.V., designs, engineers, produces and sells luxury performance sports cars. In addition to its racing and vehicle manufacturing operations, Ferrari licenses its brand to various producers and retailers of luxury and lifestyle goods.

Furthermore, the company operates two Ferrari-themed amusement parks — Ferrari World in Abu Dhabi, the United Arab Emirates and Ferrari Land at PortAventura near Barcelona, Spain.

Since opening its first Ferrari Store retail location in Maranello in 2002, the company expanded its operation to approximately 50 stores worldwide, including locations in Los Angeles and Miami. Moreover, the company operates a network of 180 dealerships in 60 markets globally.

Since separating from its previous parent company — Fiat Chrysler Automobiles N.V. (FCAU) — Ferrari has more than doubled its share price and has boosted its annual dividend payout every year. Additionally, the company’s CEO Louis Camilleri communicated last September the company’s plan to introduce 15 new car models and double its profit by 2022.

The company also announced its plans to introduce in 2022 its first utility vehicle called the Purosangue, which is Italian for pure-blooded or thoroughbred.

The new vehicle is expected to share its drivetrain with 60% of the Ferrari’s model lineup in 2022, which will offer better economies of scale and cost streamlining towards the higher profitability goal.

Another announced initiative involves expanding Ferrari’s powertrain lineup with smaller, more cost-effective and more fuel efficient V-6 engines. This will mark a major departure from the company’s traditional reliance on high-output V-12 and V-8 engines and should open additional markets for the company’s expansion.

Ferrari met or exceeded all it goals in fiscal-year 2018. The company boosted its volume more than 10% and delivered more than 9,000 vehicles in a single year for the first time in its 70-year history. Additionally, net earnings increase 20% to $730 million (645 million euros) and adjusted earnings per share (EPS) increased 21% to $3.84 (3.40 euros).

The company’s expectations for 2019 are 3% net revenue growth to $3.96 billion (3.5 billion euros) and 6% adjusted EPS advancement into the $3.96 to $4.18 range (3.50 euros to 3.70 euros).

Since its 2015 IPO, the company has increased its annual dividend payout every year. For its most recent dividend hike, the company enhanced its annual distribution 45% from $0.803 (0.71 euros) to the current $1.164 (1.03 euros).

Over the past four years, the company advanced its annual dividend payout amount nearly 125%, which corresponds to an average annual growth rate of 22.3%.

Since its one-year low on Christmas Eve 2018, the share price has gained more than 42%. Furthermore, since the IPO in October 2015, the share price has risen more than 160%.

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