Leading global car rental company, Avis Budget Group
Inc. ( CAR
), posted stronger-than-expected first-quarter 2013 results, with
adjusted earnings per share of 8 cents coming in substantially
higher than the Zacks Consensus Estimate of 1 cent. However,
quarterly earnings declined 33% from 12 cents earned in the
prior-year quarter.AVIS BUDGET GRP (CAR): Free Stock Analysis
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On a reported basis, including one-time items, the company's loss
per share came in at 43 cents in the reported quarter compared with
a loss of 22 cents in the comparable year-ago quarter.
During the quarter, the company benefited from strong pricing
trends in North America compared to last year, while higher fleet
costs and economic challenges in Europe remained a drag on the
Quarter in Detail
Avis Budget's net revenue increased 4% to $1.691 billion from
$1.623 billion in first-quarter 2012, but missed the Zacks
Consensus Estimate of $1.715 billion. The year-over-year revenue
growth was primarily driven by a 2% rise in rental day volume and a
2% increase in pricing.
However, Avis Budget's adjusted EBITDA for the quarter slipped 26%
to $83 million from $112 million in the comparable year-ago
quarter. Consequently, Adjusted EBITDA margin for the quarter
contracted 200 basis points to 4.9%.
During the quarter, the company completed the acquisition of
Zipcar Inc., which contributed about $65 million to the total
revenue. Zipcar's revenue represented a 10% increase year over
year. Further, the total number of members at Zipcar increased 12%
year over year to 792,000 at the end of the quarter.
North American car rental revenues grew 6% to
$1.100 billion in the first quarter, primarily attributable to 1%
volume expansion and 4% growth in pricing, which benefited from an
8% rise in leisure pricing. However, adjusted EBITDA fell 3% to $90
million compared with $93 million in the year-ago quarter, on
account of higher per-unit costs, offset by increased pricing and
lower interest expenses related to vehicles.
International car rental revenues came in at $515
million, up 1% from the year-ago quarter, benefiting mainly from
the acquisition of Apex Car Rentals last October. During the
quarter, a 2% increase in volume helped revenue growth, but was
offset by a 4% fall in pricing. However, adjusted EBITDA for the
segment decreased 36% to $14 million, mainly attributed to lower
pricing and inflationary cost increases.
Revenues at Truck Rental inched up 1% to $76
million, as benefits from a 4% hike in pricing were partially
offset by a 3% dip in volume. However, the segment posted an
adjusted loss before interest tax and depreciation and amortization
of $9 million compared with adjusted EBITDA of $1 million reported
in the year-ago quarter. The decline was attributed to the
company's previously announced restructuring program that caused
maintenance and damage costs, fleet costs and restructuring costs
to increase in the quarter.
Avis Budget ended the quarter with cash and cash equivalents of
$569 million and total corporate debt of $3.347 billion. As of Mar
31, 2013, the company's shareholder's equity stood at $694
Following first-quarter results, Avis Budget revised its outlook
for fiscal 2013 to take into account the acquisition of Zipcar. The
company now forecasts fiscal 2013 revenues in the range of $7.8 -
$8.0 billion, representing an increase of 6% - 9% from the 2012
level. Revenue projections for the year include an estimated
contribution of $260 million from the Zipcar acquisition.
Previously, the company had anticipated fiscal 2013 total revenue
to range from $7.6 billion - $7.8 billion.
For fiscal 2013, adjusted EBITDA is now expected to range from
$750 million - $855 million, compared with $725-$825 million
anticipated earlier. EBITDA for the year will include about $25 -
$30 million generated from the Zipcar acquisition.
However, the company retained its forecasts for per-unit domestic
fleet costs, which are expected to increase in the range of 15%-20%
to $275-$290 per month in 2013. Per unit fleet costs for the total
company are also projected to be about $275 - $290 per month in
2013, representing an 11% - 17% growth from 2012.
Nonetheless, the company does not project significant change in
its pretax and net income for 2013 as it expects an additional $22
million in interest expense related to the Zipcar transaction. The
company raised its net interest expense forecast for fiscal 2013 to
$240 million, from an earlier projected range of $230 - $235
million. The increase in net interest expense primarily reflects
the cost of financing the Zipcar acquisition, partially offset by
benefits from the company's already completed refinancings.
However, this represents a $30 million decline from the 2012
The company's non-vehicle depreciation and amortization costs
(excluding the amortization of intangibles related to the Avis
Europe and Zipcar buyouts) are expected to be about $130-$135
million, up from $125-$130 million projected earlier. Consequently,
the adjusted pre-tax income is anticipated to be in the range of
$375-$485 million, compared with $360-$470 million forecasted
The company's effective tax rate in 2013 is expected to be in the
range of 37%-38% on an adjusted basis, while diluted shares
outstanding are projected to be approximately 118 million. Based on
the above expectations, the company projects adjusted earnings in
the range of $2.00-$2.60 per share in 2013.
Additionally, the company projects annual synergies from the
Zipcar acquisition in the $50 - $70 million range for the first two
years from the date of the acquisition.
Other Stocks Worth Considering
Currently, Avis Budget carries a Zacks Rank #2 (Buy). Other stocks
that are performing well in the business services industry include
Hertz Global Holdings Inc. ( HTZ ), Interval
Leisure Group Inc. ( IILG ) and
SouFun Holdings Ltd. ( SFUN ), all of which
carry a Zacks Rank #1 (Strong Buy).