The leading car rental company in the world,
Avis Budget Group Inc.
), posted stronger-than-expected first-quarter 2012 adjusted
earnings of 12 cents per share, beating the Zacks Consensus
estimated loss of 7 cents per share. Driven by solid top-line
growth along with improved margins, Avis Group's adjusted earnings
increased 9.1% from the prior-period earnings of 11 cents.
On a reported basis, including one-time items, the company
reported loss per share of 22 cents in the reported quarter
compared with earnings of 6 cents reported in the year-ago
As per Avis Budget, travel demand across most of its markets
remained strong in the first quarter, while it continued to
smoothly progress on the integration of the recently acquired Avis
During the quarter, Avis Budget registered a 31% jump in net
revenues to $1,623 million from $1,235 million in the year-ago
quarter, beating the Zacks Consensus Estimate of $1,619 million.
The year-over-year increase came mainly from a 31% rise in rental
day volume and a 43% increase in ancillary revenues, partially
offset by a decline of 3% in pricing. Excluding the impact from
recently acquired Avis Europe, revenue increased 5%, with rental
volume up 6% while prices went down 2%.
By segment, North American car rental revenue rose 4% to $1,038
million in the first quarter, primarily attributable to a 7% volume
expansion and 10% increase in ancillary revenue, partially offset
by a 3% decline in prices. International car rental revenue came in
at $510 million, a whopping rise of 215% year over year, benefiting
mainly from the Avis Europe acquisition. Revenue at Truck rental
remains flat at $75 million, as benefits from a 4% rise in pricing
were fully offset by a decline of 4% in volume.
Driven by solid top-line performance along with lower fleet
costs in North America, Avis Budget's adjusted EBITDA for the
quarter surged 43% to $119 million. Consequently, Adjusted EBITDA
margin for the quarter expanded 60 basis points to 7.3%.
Avis Budget ended the quarter with cash and cash equivalents of
$606 million and total corporate debt of $3,301 million. At the end
of quarter, the company's shareholder's equity stands at $435
Events during the Quarter
In February 2012, Avis Budget took a massive step to expand its
customer base in Germany by tying up with leading German automobile
club Allgemeiner Deutscher Automobil Club (ADAC).
The multi-year partnership agreement with the German club will
give nearly 18 million club members the access to Avis' products,
services and special offers. Avis will feature on the auto club's
email campaigns and official website, providing the club members
with the facility to reserve an Avis vehicle for business trips,
leisure travel, when their car is in the shop or they need a rental
In addition to the website, the club members will also have the
facility to book an Avis vehicle through an Avis reservation
telephone number assigned for ADAC members.
In an effort to enhance its liquidity position and reduce
financing cost, Avis Budget issued $750 million worth of
asset-backed bonds carrying an annual interest rate of 2.6%, in
March this year. According to Avis Budget, the interest rate on the
new ABS debt is the lowest since 2003 andwill result in savings of
about $20-$25 million in interest expense in 2012.
Moreover, in April, Avis Budget Car Rental LLC, a unit of Avis
Budget closed an offering worth $125 million, issuing senior notes
with an interest rate of 8.25%. These notes are expected to mature
in 2019. The company plans to utilize the net proceeds from the
notes issue to buyback 7.625% senior notes, which are slated to
mature in 2014.
In 2012, Avis Budget expects domestic fleet costs to decline in
the range of 3% to 8% on a per-unit basis, instead of a rise of
15%-20% forecasted earlier. The company's non-vehicle depreciation
and amortization costs are expected to be about $110 million in
2012, down from $125 million anticipated previously and net
interest expenses to be about $255 million. The company's effective
tax rate in 2012 is expected to be in the range of 34%-38%, on
adjusted basis, while diluted shares outstanding is projected to be
approximately $125 million.
Avis Budget is continuing with its efforts to reduce costs while
enhancing productivity through its Performance Excellence
initiative and five-point cost-reduction and efficiency improvement
plan. The company expects its cost-saving initiatives to provide
incremental savings of over $45 million in 2012.
Further, Avis Budget pointed out that it is on track with its
integration plans for Avis Europe, acquired on October 3, 2011, and
expects its 2012 results to gain substantially from the
integration-related synergies coupled with its strategic
initiatives. Annual synergies from the Avis Europe acquisition are
expected to be over $35 million, within the first anniversary of
Based on above assumption,the company expects full-year total
revenue in the range of $7.3 - $7.6 billion, implying a
year-over-year growth of 24% to 29%. Adjusted EBITDA for fiscal
2012 is expected to increase 35% - 43% year over year to $825 -
$875 million, while adjusted pre-tax income will be in the range of
$460 - $510 million.
Adjusted earnings per share for fiscal 2012 are expected in the
range of $2.35 to $2.65. The current Zacks Consensus Estimate for
fiscal 2012 stands at $2.53 per share.
Avis Budget Group is the leading general-use vehicle rental
company in North America, Australia and New Zealand. Moreover, a
formidable network of more than 10,000 rental locations and 350,000
vehicles enable the company to strengthen its well-established
position in a highly competitive vehicle rental industry.
Avis follows a core global strategy of partnering with leading
travel brands to expand its customer reach while creating
additional demand. The company's recent partnership in Germany
testifies its commitment to its global strategic initiatives, which
is based on the value of its brands and its ability to provide
synergies to its partners that also benefit their brands and
The company faces intense competition from other established
players, such as
Hertz Global Holdings Inc.
), Enterprise Rent-A-Car,
Dollar Thrifty Automotive Group Inc.
Ryder System Inc.
Avis Budget maintains a Zacks #1 Rank, which translates into a
short-term 'Strong Buy' rating. However, we are maintaining a
long-term 'Neutral' recommendation on the stock.
AVIS BUDGET GRP (CAR): Free Stock Analysis
DOLLAR THRIFTY (DTG): Free Stock Analysis
HERTZ GLBL HLDG (HTZ): Free Stock Analysis
RYDER SYS (R): Free Stock Analysis Report
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