If putting together last week’s article on Aston Martin’s Q3 results (Aston Martin Q3 2021) was an exercise in digging through a vat of lipstick to find one rather annoyed pig at the bottom, Ferrari’s Q3 results are a case study in what highly competent management team, executing a clear strategy, that’s supported by wise forward thinking ownership looks like. Needless to say, it was another excellent quarter for the Maranello based supercar manufacturer, and the stock market rewarded Ferrari by pushing the stock price up $30 to $278 in the past two weeks, adding an additional $7.5 billion to its market cap. While the stock market can be quite irrational at times, this was a well-earned vote of confidence in both the new CEO, Benedetto Vigna, and in a company that has successfully navigated multiple major challenges in the past several years. I believe it also reflects the transparency that Ferrari demonstrates when it presents the results. In this case, not only did Ferrari provide the usual year ago comparisons (which due to COVID are irrelevant) but they also provided the comparisons to the same period in 2019. It would save me a lot of time if certain of their competitors adopted similar practices. If you had been in a coma since February 2020, just woke up, and were given Ferrari’s Q3 2021 results to review, you would not have an inkling that the world was recently turned upside down by a major pandemic. The Ferrari machine continues to produce highly desirable cars and immense amounts of cash. As an example of just how well they are doing, Ferrari has raised its 2021 guidance significantly this quarter given some of the full year goals have already been achieved.
The Ferrari earnings call was different this time but insightful as usual. The new CEO, Benedetto Vigna led the call with significant support from the CFO, Antonio Picca Piccon. Both did a nice job and handled the various questions tossed at them by the analysts quite comfortably. Vigna comes across as a modest man who’s quite comfortable having his accomplishments do the talking for him. When asked what he brings to Ferrari, Vigna answered quite thoughtfully, “three things: international experience, leadership style and ability to manage situations in a changing time”. Based on this, I expect we will see Ferrari continue to focus on developing its markets outside of Europe and the push into electrification will only accelerate and intensify under Vigna’s leadership. I did miss having John Elkann, Executive Chairman and former acting CEO, on the call as Elkann seemed willing to provide a bit more color and insights into Ferrari’s longer-term strategy than the more reserved Vigna & Piccon. The areas that I found interesting follow (note: in terms of the financial results, I am using Q3 2019 as the reference quarter as it gives a more balanced picture on the strength/weakness of the numbers):
Over the last several years, Europe received 46-48% of Ferrari’s production. This jumped up to 55% in 2020 and dropped back a bit to 47% in Q3 2021 as more cars were sent to China. US deliveries accounted for 26% in Q3, down from a high of 32% in 2018 but still up 2 points on a quarter to quarter basis. Ferrari seems to quite deliberately adjust supply to take advantage of currency movements. As the US dollar has weakened, US supply was reduced, with the dollar now strengthening again, the US is receiving a high allocation of new cars. The tightening of supply in the US in the last couple of years has also helped support residuals which are at an all-time high for recent models.
The Ferrari machine keeps going from strength to strength. It may just be the most effective and efficient organization to emerge from Italy since the Roman Legions headed towards Gaul. The stock price reflects this. Ferrari continues to execute well, and what looked to be a few Covid driven delays on a few new models a couple of quarters ago, have been worked through and they are back on track. The new CEO, Benedetto Vigna, will now need to lead Ferrari through perhaps the most significant transformation the business has ever undertaken since the placement of engines went from the nose to the middle of the car. It will be Vigna’s job to lead Ferrari seamlessly through the transition to hybrids and EVs, launch the Purosangue SUV, and get the F1 Team back to the pointy end of the grid. The $68.2 billion market cap for a company with projected revenues of €4.3 billion in 2021, is as much a reward for past performance as it is a vote on what perceived to be a very bright future.
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