Ferrari shares fall after it fails to upgrade guidance despite earnings rise

MILAN (Reuters) - Shares in Ferrari RACE.MI went into reverse on Friday as the Italian luxury carmaker failed to lift its guidance for 2019 despite strong results in the first part of the year.

FILE PHOTO: The Ferrari 488 Pista is seen during a presentation at the 88th International Motor Show at Palexpo in Geneva, Switzerland, March 6, 2018. REUTERS/Pierre Albouy/File Photo

Releasing its second quarter results, the company confirmed that it was on track for the higher end of the guidance range for all relevant figures.

However, there was some disappointment as many investors and analysts thought an upgrade was in store after a forecast-beating first quarter.

“The market was expecting them to raise their guidance for the year,” a Milan-based trader said.

Trading in the company’s Milan-listed shares was halted for excessive declines after a 6.9% drop. They were down 3.55% by 1415 GMT.

For 2019, Ferrari forecasts its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to rise around 10% to between 1.2-1.25 billion euros. Sales are seen growing more than 3% to more than 3.5 billion euros.

Chief Executive Louis Camilleri said there were several factors behind the decision not to lift earnings guidance.

He cited the discontinuation of certain models later this year, less favorable currency effects going forward, global trade tensions, and outperformance in China in the first half of the year as customers snapped up cars in anticipation of stricter anti-pollution rules.

“It would seem to me that it was a prudent move on our path,” he told analysts on a post-earnings call.

To support its growth, Ferrari will unveil two new models in September, Camilleri said, with one more expected by the end of the year. These are in addition to the two new models the Maranello-based company has already presented this year, including the F90 Stradale, its first hybrid - excluding special editions.

The company’s performance is a bright spot in the luxury car segment, where its competitors are struggling.

Last month Aston Martin AML.L cut its forecasts for volumes, investments and margins for 2019, while Tata Motors' TAMO.NS luxury brand Jaguar Land Rover posted a loss in the April-June period with analysts doubting it can be turned around in the short term.

Former Ferrari parent FCA's luxury brand Maserati FCHA.MI also lost money, with a negative EBIT margin of 34.7%. The group's CEO Mike Manley said he expected more difficult quarters this year.

“(Ferrari) stock may take a breather today but the story remains exciting and while some were expecting more today on the guidance, we expect buying support on the dip,” Morgan Stanley analysts said in a report.

Ferrari said performance in the April-June period was led by robust deliveries of its 8 cylinder Portofino model and higher-margin 12 cylinder 812 Superfast model. Although shipments were up for 8 cylinder models, it cautioned they had slightly decreased for 12 cylinder models.

Ferrari’s core earnings rose 8.7% in the second quarter to 314 million euros ($348 million) in line with analyst expectations, according to a Reuters survey.

Margins on adjusted EBITDA weakened to 32% from 33.1% in the first quarter, versus a full-year target of 34%.

Chief Financial Officer Antonio Picca Piccon told analysts margins would suffer a little more in the third quarter compared to the high levels achieved in the same period last year.

Camilleri, who took over from Sergio Marchionne after his death in 2018, said earlier this year that Ferrari is counting on hybrid models and the Purosangue SUV, expected in 2022, to exploit its potential in China.

Ferrari shipped 2,671 cars in the second quarter, including 289 to China, up 63% versus the same period of last year, while shipments to the Americas fell 6% to 803 units.

Additional reporting by Giancarlo Navach; Editing by Keith Weir and Kirsten Donovan