Ferrari Damps Growth Expectations as Supercar Profit Boom Slows

(Bloomberg) -- Ferrari NV damped expectations of a breakaway finish to 2017 as earnings growth fueled by limited-edition supercars such as the $2.1 million LaFerrari Aperta convertible slowed in the third quarter.

While the Italian sports-car maker signaled it’s achieving a long-held goal two years early, its raised forecast of about 1 billion euros ($1.17 billion) in 2017 adjusted earnings before interest, taxes, depreciation and amortization failed to surpass analyst estimates. That marks a 14 percent increase from the 2016 figure, slower than the 24 percent jump reported for nine-month earnings. Ferrari shares fell the most in two months.

After the stock more than doubled in the last 12 months, Ferrari is under greater pressure to show it can maintain its frenetic growth pace. Chief Executive Officer Sergio Marchionne said Thursday on a conference call that, even with profit held back by Ferrari’s failure to top the Formula One racing ranking this season, the full-year forecast is “conservative” and achievable.

Marchionne has aimed for 1 billion euros in operating profit since he replaced Luca Cordero Di Montezemolo at the helm of Ferrari in 2014. Reaching it before 2019 opens the way for the 65-year-old CEO to launch his final business plan for the supercar manufacturer before he retires. The new five-year strategy, to be presented in early 2018, is set to include expansion into new segments, including sport utility vehicles, to win more customers with less-extreme models.

“We would not be surprised if Ferrari has left room in the guide to enable” the company to beat forecasts for the fourth quarter and full year, analysts at Evercore ISI, including Arndt Ellinghorst, said in a report to clients.

Third-quarter adjusted Ebitda rose 13 percent from a year earlier, Ferrari said Thursday, the most sluggish gain since early 2016. The supercar producer’s shares dropped 2.9 percent to 100.80 euros at the close in Milan, the biggest decline since Sept. 7. That pared the stock’s gain this year to 82 percent, valuing the company at 19 billion euros.

Ferrari will continue bringing out more high-priced, restricted-volume models in a project pushed this year to celebrate its 70th anniversary. The company introduced the racetrack-only FXX K Evo to the public at the annual Finali mondiali competition in late October, pledging that only an “extremely limited” number will be produced. The “closed-wheel laboratory car” will be aimed at “a small, highly select group of Ferrari clients: supercar enthusiasts eager to share the development of technologically innovative content,” according to the automaker.

Adjusted Ebitda has jumped from 634 million euros in 2013, the last full year under Montezemolo, to 880 million euros in 2016. The business plan through 2022 could include a target to double operating profit, people familiar with the project said in August. Until the forecast boost, Ferrari was predicting adjusted earnings of 950 million euros for 2017.

SUVs won’t play a role in Ferrari’s earnings for awhile. While the carmaker is committed to the models, it will take about 2 1/2 years to decide on their production, which will be limited to preserve exclusivity, Marchionne said in October. Customers’ reception of the project is good, he said Thursday.

To contact the reporters on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net, Chiara Remondini in Milan at cremondini@bloomberg.net.

To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net, Tom Lavell, Chris Reiter

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