Battered by lower pricing and rise in fleet costs,
Hertz Global Holdings, Inc.
) posted lower-than-expected fourth-quarter 2013 bottom-line
results. The company's adjusted earnings of 26 cents per share
came below the year-ago comparable quarter earnings of 33 cents
as well as the Zacks Consensus Estimate of 32 cents.
On a reported basis, Hertz Global posted break-even earnings
for the quarter against a loss of 9 cents per share in the
Net revenue at Hertz Global increased approximately 10.2% year
over year to $2,556.3 million primarily driven by robust
performance across the company's entire segments. However, the
top line missed the Zacks Consensus Estimate of $2,607.0
Revenues for the
U.S Car Rental
segment increased 14.1% year over year to $1,476.3 million. This
was attributable to a rise of 16.1% in transaction days primarily
owing to acquisition of Dollar Thrifty. However, this was
partially offset by the divestiture of Advantage. During the
quarter, U.S off-airport sales grew 9.8% on a year-on-year basis.
Dollar Thrifty also caused the average number of cars operated to
rise by 22.4% year over year to 472,200.
Compared with the previous-year quarter, quarterly revenues
International Car Rental
segment came in at $544.2 million, reflecting a year-over-year
increase of 5.8%. The rise resulted from an increase of 5.5% in
transaction days, which was due to the strong performance in
Europe. In the reported quarter, the average number of
company-operated cars for the International segment totaled
154,300, up 3.6% from the year-earlier quarter.
Quarterly revenues from
Worldwide Equipment Rental
segment rose 4.0% year over year to $400.9 million. The growth
was due to 9.8% increase in equipment rental volume as well as a
2.4% price hike.
During the quarter, revenues from
All Other Operations
segment rose 6.8% from the previous-year period to $134.9 million
owing to higher revenues from the Donlen business.
Full-Year 2013 Performance - A Synopsis
The company's revenues for the year increased 19.4% to
$10,771.9 million from $9,024.9 million in 2012. However, Hertz
Global's top line missed fell short of the Zacks Consensus
Estimate of $10,827.0 million. Adjusted earnings for the period
came in at $1.63 per share, up 24.4% from $1.31 earned in 2012.
However, the company's bottom line missed the Zacks Consensus
Estimate of $1.70 per share. During the period, corporate
earnings before interest, taxes, depreciation and amortization
(EBITDA) of the company climbed 25.6% to $2,043.7 million.
This leading airport car rental brand in the U.S. and at 120
major airports in Europe ended the year with cash and cash
equivalents of $524.3 million, total net debt of $15,026.3
million and shareholders' equity of $2,771.2 million.
Free cash flow during the year came in at $448.7 million
compared with $155.1 million in 2012, primarily backed by steady
growth in earnings and performance of working capital. However,
this was partly offset by accelerated investments and capital
expenses. Net cash flow generated from operating activities came
in at $3,589.7 million in 2013, against $2,709.8 million
generated in 2012.
Along with the earnings release, the company announced a share
buyback program worth $1.0 billion.
Equipment Renting Business to Spin Off
In a separate press release, the board at Hertz Global
announced its decision to separate the company into two
independent, publicly traded companies. The first company will
retain Hertz's car rental businesses comprising Hertz, Dollar,
Thrifty and Firefly as well as its fleet leasing services
division, Donlen. The second company emerging from the separation
will be named 'Hertz Equipment Rental Corporation' or 'HERC' and
will consist of the company's equipment rental business.
The spin-off, which will be a tax-free transaction for Hertz
Global's shareholders, is expected to generate $2.5 billion. The
company plans to use the proceeds to lower debt and fund a newly
approved $1 billion share repurchase program. The buyback, which
will begin after the spin-off is completed, will replace the
company's existing $300 million buyback program.
Outlook for 2014
For 2014, this largest general use car rental company is
anticipating revenues in the range of $11,400-$11,700 million
based on domestic and international RAC revenue growth of 6%-8%
and 5%-7%, respectively. Corporate EBITDA is forecasted to come
between $2,060.0 million and $2,420.0 million. Adjusted earnings
per share are expected in the band of $1.70 to $2.00. The current
Zacks Consensus Estimate for 2014 is pegged at $2.00 per
For the first quarter of 2014, the company expects earnings to
be between 7 cents and 9 cents per share.
Other Stocks to Consider
Hertz Global currently carries a Zacks Rank #3 (Hold). Some
better-ranked stocks in the related industry worth a look include
JTH Holding, Inc.
SouFun Holdings Ltd.
ExamWorks Group, Inc.
). While JTH Holding and SouFun Holdings sport a Zacks Rank #1
(Strong Buy), ExamWorks Group holds a Zacks Rank #2 (Buy).
EXAMWORKS GROUP (EXAM): Free Stock Analysis
HERTZ GLBL HLDG (HTZ): Free Stock Analysis
SOUFUN HLDG-ADR (SFUN): Free Stock Analysis
JTH HOLDING INC (TAX): Free Stock Analysis
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