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Will Ferrari (RACE) Outperform Earnings Estimates in Q1?

Ferrari N.V. RACE is set to report first-quarter 2016 results on May 2. In the last quarter, the company reported a negative earnings surprise of 11.43%. Let us see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Ferrari is likely to beat earnings this season because it has the right combination of two key components.

Zacks ESP: Earnings ESP for Ferrari is currently pegged at +12.50% as the Most Accurate estimate of 36 cents stands above the Zacks Consensus Estimate of 32 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. 

Zacks Rank: Ferrari currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. Conversely, 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.

Ferrari’s Zacks Rank #3 and positive ESP make us reasonably confident of an earnings beat.

What is Driving the Better-than-Expected Earnings?

Ferrari, a former subsidiary of Fiat Chrysler Automobiles N.V. FCAU, has witnessed consistent revenue growth over the last 10 years. The company has diversified revenue sources. While its major revenues are generated from the sales of luxury cars, the company also sells engines and Ferrari brand merchandise. Further, the company owns a Formula 1 racing team as well as theme parks, which are also good sources of revenue. Also, Ferrari is consistently expanding its global presence, which helps boost earnings.

Ferrari started shipping the F12 super class in Dec 2015 and the F60 America in Jan 2016, which should augment revenues in the first quarter. The company expects total shipments for 2016 to be around 7,900, higher than 7,664 units recorded in 2015. Improved shipment volumes should boost the company’s revenues and results.

Stocks to Consider

Axle & Manufacturing Holdings Inc. AXL has an Earnings ESP of +7.04% and a Zacks Rank #3. The company’s first-quarter 2016 financial results are scheduled for release on May 6.

Nissan Motor Co. Ltd. NSANY – a Zacks Rank #1 (Strong Buy) stock – will report its fourth-quarter and fiscal 2015 (ended Mar 31, 2016) financial numbers on May 12.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
NISSAN ADR (NSANY): Free Stock Analysis Report
FIAT CHRYSLER (FCAU): Free Stock Analysis Report
AMER AXLE & MFG (AXL): Free Stock Analysis Report
FERRARI NV (RACE): Free Stock Analysis Report
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