Avis Budget Group Inc
), the leading global car rental company, remains on our Neutral
A well-diversified customer base, good pricing power and an
aggressive expansion policy facilitate Avis Budget to stay
abreast in the soft economic environment. Moreover, we expect
incremental cost savings from its Performance Excellence
initiative as well as 5-point cost-reduction and efficiency
improvement plan to boost profitability.
Furthermore, Avis Budget remains focused on expanding its
operations through acquisitions and joint ventures. In order to
enhance its global footprint, the company is investing in other
emerging markets where car rental demand is rising.
Avis Budget's urge to exploit new avenues was evident from the
recent acquisition of Zipcar Inc., wherein the company widened
its offerings from car rental to car sharing. We believe that
these strategies, along with better customer support systems will
boost the company's top line.
We are also impressed by Avis Budget's bottom-line performance
in first-quarter 2013. The company came out strong with earnings
rising twofold compared to the Zacks Consensus Estimate, driven
by strong pricing trends in North America amid an unstable
Buoyed by better-than-expected quarterly results along with
new business opportunities from the recently acquired Zipcar
Inc., management provided an encouraging revenue and earnings
outlook for 2013.
However, we remain anxious about the stock's future
performance due to a possible rise in fleet costs in North
America in 2013, which may adversely affect its margins. The
company also remains vulnerable to risks of foreign operations
and is heavily dependent on third-party distribution
Given the pros and cons of the stock, we prefer to remain on
the sidelines and maintain our Neutral recommendation. This is
supported by the company's current Zacks Rank #3 (Hold).
Other Stocks Worth Considering
Better performing stocks in the business services industry
Essex Rental Corp
ExamWorks Group Inc
), all carrying a Zacks Rank #2 (Buy).
AVIS BUDGET GRP (CAR): Free Stock Analysis
CARDTRONICS INC (CATM): Free Stock Analysis
ESSEX RENTAL (ESSX): Free Stock Analysis
EXAMWORKS GROUP (EXAM): Free Stock Analysis
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