What's In Store For Ferrari (RACE) This Earnings Season?

Ferrari N.V. (NYSE:RACE) is set to report third-quarter 2016 results before the market opens on Nov 7. Last quarter, the company delivered a positive earnings surprise of 32.61%. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

Ferrari, a former subsidiary of Fiat Chrysler Automobiles N.V. (NYSE:FCAU) , has witnessed consistent revenue growth over the last 10 years. The company, which has diversified revenue sources, generates majority of its revenues from the sales of luxury cars, and also sells engines and Ferrari brand merchandise. Further, it owns a Formula 1 racing team as well as theme parks, which are good sources of revenue too. Moreover, Ferrari is consistently expanding its global presence, which helps boost earnings. The company expects total shipments for 2016 to be 8,000 units, higher than 7,664 units recorded in 2015. Improved shipment volumes should boost the company’s revenues and earnings.

Ferrari saw its product mix being negatively impacted by higher sales of V8 models over V12. V12 supercars are sold at a higher price and are therefore more profitable for the company than V8 supercars. Thus, the change in market demand pattern can adversely affect margins. In the last reported quarter, the company incurred expenses related to the global Takata airbag inflator recalls. This may continue in the third quarter.

Earnings Whispers

Our proven model does not conclusively show that Ferrari is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Ferrari’s Earnings ESP is 0.00% because the Most Accurate estimate and the Zacks Consensus Estimate both stand at 54 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Ferrari carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Magna International Inc. (NYSE:MGA) , which is expected to report third-quarter 2016 financial results later today, has an Earnings ESP of +2.50% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Axle & Manufacturing Holdings Inc. (NYSE:AXL) has an Earnings ESP of +5.19% and a Zacks Rank #3. The company’s third-quarter 2016 financial results are expected to release on Nov 4.

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