Hertz Global Misses on Q4 Earnings (revised) - Analyst Blog


Battered by lower pricing and rise in fleet costs, Hertz Global Holdings, Inc. ( HTZ ) 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 quarter.

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.

Segment Performance

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.

Financial Update

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. ( TAX ), SouFun Holdings Ltd. ( SFUN ) and ExamWorks Group, Inc. ( EXAM ). 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.)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: HTZ



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