We recently upgraded our long-term recommendation on car rental
company
Avis Budget Inc.
(
CAR
) to 'Outperform', on account of a host of positives including
better-than-expected first-quarter 2012 results, an improved
earnings outlook as well as various encouraging developments on the
cost and investment fronts.
Sustained focus on productivity and cost containment initiatives
along with better travel trends and lower fleet costs drove Avis
Budget to post better-than-expected first-quarter 2012 results. The
quarterly earnings of 12 cents per share increased over 9% from the
prior-year quarter, beating the Zacks Consensus Estimate of a loss
of 7 cents per share. 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.
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 Europe business.
Moreover, the company's bottom-line performance has been
supported by its cost-cutting initiatives, such as Performance
Excellence, and Five-Point Cost- Reduction and Efficiency
Improvement Plan. Looking ahead, the company expects incremental
cost savings from these initiatives of approximately $45 million in
2012. Further, the company has guided per unit domestic fleet costs
to decline along with lower-than-expected non-vehicle depreciation
and amortization costs.
Driven by the cost guidance and the projected effect of its
long-term cost-saving initiatives, Avis Budget expects fiscal 2012
earnings to be in the range of $2.35 to $2.65 per share, up 42% to
61% from fiscal 2011 level. Full-year total revenue is expected to
come in the range of $7.3 - $7.6 billion, reflecting a
year-over-year growth of 24% to 29%.
Further, the leading general-use vehicle rental company with a
formidable network of more than 10,000 rental locations and 350,000
vehicles 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 with leading
German automobile club Allgemeiner Deutscher Automobil-Club
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
businesses.
Keeping up with its strategy to expand geographically, Avis
Budget continues to pro-actively look for strategic acquisitions
and alliance opportunities. The acquisition of Avis Europe in
October 2011 was an important step in this direction. Currently,
the company remains on track with its integration plans for Avis
Europe and expects its 2012 results to gain annual synergies of
over $35 million, within the first anniversary of the
acquisition.
Avis Budget's growth strategy depends on its continuous efforts
of introducing new ideas and investments in technology up
gradation, which we believe will likely boost the company's
performance. Recently, the company has entered into a $14 million
deal with I.D. Systems to install virtual car rental technology in
over 25,000 vehicles. The technology will permit travelers for
reserving, picking up and returning rental vehicles through their
smart phones, as well as they will get an automated electronic
receipt after the completion of the rental, enabling the company to
minimize cost while enhancing profitability.
Avis Budget competes with
Hertz Global Holdings Inc.
(
HTZ
), Enterprise Rent-A-Car and
Dollar Thrifty Automotive Group Inc.
(
DTG
). On account of host of positives, the company maintains a
Zacks #1 Rank, indicating a short-term 'Strong Buy' rating.
AVIS BUDGET GRP (CAR): Free Stock Analysis
Report
DOLLAR THRIFTY (DTG): Free Stock Analysis
Report
HERTZ GLBL HLDG (HTZ): Free Stock Analysis
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