Ferrari's Rise in Value

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【Summary】Ferrari's stock value has seen the biggest upward revision, with positive quarterly results and an adjusted sales forecast. Other car manufacturers like Mercedes-Benz, Volkswagen, and Renault have also experienced increases in fair value. Luxury companies Hermes International and L'Oreal have seen their fair value revised upwards as well.

FutureCar Staff Aug 14, 2023 4:23 PM PT

July is typically the month when companies release their quarterly earnings reports. Morningstar's equity analysts are currently reviewing the fair value estimations for the stocks they cover. Last week, they focused on the fair value of UK stocks, and now they are examining the entire European universe. During the months of June and July, the analysts made revisions to the fair value estimations for 42 companies. Out of these revisions, 30 were upward revisions and 12 were downward revisions, indicating an overall positive tone.

One notable upward revision was made for Ferrari (RACE), with the fair value estimation increasing from €190 to €257. In the second quarter, Ferrari reported diluted earnings per share of €1.83, surpassing the FactSet consensus of €1.73. This was an increase of €0.47 compared to the previous year. Additionally, Ferrari adjusted its full-year sales forecast from €5.7 billion to €5.8 billion.

Other carmakers also saw revisions to their target prices. Mercedes-Benz (MBG) had its fair value increased from €109 to €111, while Volkswagen (VOW3) experienced a slight increase from €338 to €344 euros. Renault's (RNO) target price rose by €1, from €86 to €87. These revisions reflect the positive quarterly results posted by these companies. Mercedes-Benz reported second quarter earnings per share of €3.34, Renault's earnings per share increased by 5.28 euros compared to the previous year, and Volkswagen's consolidated revenues rose 15% to €80.1 billion.

Two of the largest French companies, Hermes International (RMS) and L'Oreal (OR), also had their fair value estimations revised upwards. Hermes International saw a 28% increase in fair value, rising from €990 to €1,270. This was attributed to strong revenue growth and improved profitability in the first half of 2023. For L'Oreal, the fair value estimate was raised to €376 from €336, driven by a higher annual sales growth forecast.

In the banking sector, the fair value of Dutch ING Group (ING) was increased from €17 to €19 euros. This valuation represents 1.5 times ING's tangible book value in 2021 and 11 times the estimated earnings for 2023. On the other hand, the fair value of Finnish company Kone Oyj (KNEBV), a leading manufacturer of elevators and escalators, was reduced from 56 euros to 48 euros. This decrease was attributed to the decline in market activity in China, which is a significant market for Kone. The analyst covering the company stated that recent Chinese policy measures aimed at reviving the Chinese property market have not yet resulted in a much-needed turnaround for the sector.

Lastly, the fair value of Spanish renewable energy developer Corporacion Acciona Energias Renovables (ANE) was reduced by 9%, from €35 to €32. This reduction was due to lower electricity prices achieved in the short term.