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 prior-year
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 million.
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 for the
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 focused solely on equipment
rental business, though an official name for the new company has
not been announced yet.
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 share.
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).
(We are reissuing this article to correct a mistake. The
original article, issued earlier today, March 19, 2014, should no
longer be relied upon.)
HERTZ GLBL HLDG (HTZ): Free Stock Analysis
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