Ferrari Shares Skid On Crashing Deliveries In China  

Ferrari shares are sliding in premarket trading in New York as third-quarter shipments of its luxury supercars to China plummeted, with the industry-wide downturn finally catching up to the Italian automaker. The broader luxury downturn has shown signs of stress, with industry fashion giants LVMH Moët Hennessy Louis Vuitton and Gucci’s parent company Kering cautioning about a slowdown in China and other top markets in the world. 

The Italian luxury sports car maker reported a third-quarter profit that was slightly better than expected versus analysts tracked by Bloomberg.

Shipments were a major focus. The Italian manufacturer was battered by a 29% plunge in shipments to the China region and a 2.4% decline in deliveries to the US. 

Here’s a snapshot of quarterly results:

• Adjusted Ebitda EU638 million, +7.2% y/y, estimate EU633.8 million (Bloomberg Consensus)

• Adjusted Ebit EU467 million, +10% y/y, estimate EU463.3 million

• Adjusted Ebit margin 28.4% vs. 27.4% y/y, estimate 28%

• Revenue EU1.64 billion, +6.5% y/y, estimate EU1.64 billion

• Cars and spare parts revenue EU1.40 billion, +5.3% y/y, estimate EU1.42 billion

• Sponsorship, commercial and brand revenue EU174 million, +20% y/y, estimate EU161.7 million

• Adjusted net income EU375 million, +13% y/y, estimate EU369.8 million

• Adjusted diluted EPS EU2.08 vs. EU1.82 y/y, estimate EU2.03

• Industrial free cash flow EU364 million, estimate EU342.7 million

Deliveries 3,383, -2.2% y/y, estimate 3,469

• EMEA deliveries 1,426 units, +2% y/y, estimate 1,486

• Americas Deliveries 1,070 units, -2.4% y/y, estimate 1,097

• Mainland China, Hong Kong and Taiwan 281 units, -29% y/y, estimate 348.4

• Rest of APAC deliveries 606 units, +6.3% y/y, estimate 582.27

Ferrari noted that despite lower shipments in the quarter, increased client customization requests helped drive additional revenue. 

“The third quarter once again shows growing results for Ferrari, driven by a strong product mix and increased personalization,” Benedetto Vigna, CEO of Ferrari wrote in a statement. 

Vigna said, “It confirms our commitment to deliver on the promises we made at our Capital Markets Day in 2022, along with the exceptional order book visibility well into 2026 …” 

Vigna’s comments renewed confidence in guidance that the company upgraded in August, which it plans to hit. 

In markets, Ferrari shares in New York slid 4%. On the year, shares have bucked the luxury slowdown, up nearly 41% (as of Monday’s close). 

Goldman’s George Galliers and Sian Keegan pointed out to clients this morning:

Guidance reiterated a potential source of disappointment – Ferrari has raised guidance at 3Q every year since 2016, with the exception of 2018. Hence, the lack of a raise today may be seen as disappointing. Ferrari reiterated its FY24 guide, adding that it had even greater confidence despite persistent cost inflation. Cons EBITDA/EBIT estimates presently sit c.2.5%/2.6% ahead of the low end of Ferrari’s guide, meanwhile, the low end also implies 4Q adj. EBIT cuts of c.11%. As per prior years, we expect that Ferrari’s guidance remains conservative. Ferrari commented that its order book stretches into 2026 and that the new F80 is fully allocated.

The analysts maintained a “Neutral” rating on the stock with a 12-month price target of €470/$508.

The slowdown in luxury spending is very concerning because it signals weakness and uncertainty in consumer confidence, especially among high-net-worth individuals who typically drive demand in these high-end markets. Maybe that’s why Senator Elizabeth Warren called for the Federal Reserve to deliver a 50 basis point cut later this week…