Last quarter, the company reported a negative surprise of 6.25%. Avis Budget missed earnings estimates thrice by a wide margin in the last four quarters, pulling down the average to a negative earnings surprise of 42.53%.
Let's see how things are shaping up for this announcement.
Factors to Influence Q1 Results
On Mar 8, 2017 the company entered into a definitive purchase agreement with I.D. Systems, Inc. IDSY . Per the agreement, I.D. Systems' proprietary wireless rental fleet management systems will be used in Avis Budget's vehicle rental fleet. The financial details of the agreement remain under wraps. This deal will help Avis Budget enhance its operations. I.D. Systems' wireless in-vehicle management system permits two-way data communications between vehicles and various car rental operating systems. This, when combined with Avis Budget's existing system, will help the company rent and check-in vehicles virtually, all on a mobile devices. The collaboration will help it significantly streamline and automate the vehicle data collection and billing process.
During the quarter, the company amended its existing credit facility to improve its financial flexibility and augment liquidity. The modified credit agreement is likely to provide the requisite wherewithal to undertake strategic investments for steady organic and inorganic growth of the company. The amended credit facility increases Avis Budget's borrowing capacity by $188 million. The modified credit agreement also extended the debt maturity by three years to 2022 and reduced annual interest burden by $5 million. The company presently has $1.15 billion of outstanding term loans, scheduled for maturity in Mar 2022.
However, hurdles like unfavorable pricing and high fleet costs have been weighing upon its results and remain a threat to its performance. Moreover, the company's significant presence in the international markets exposes it to foreign currency headwinds.
Also, a major portion of Avis Budget's domestic car rental reservations come through third-party distribution channels. Consequently, any disruption and termination of relationships or reduction in transaction volume with such channels may have an adverse impact on the company's financial condition as well as its operational results.
Our proven model does not conclusively show that Avis Budget will beat earnings this time. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.
You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks ESP: Avis Budgethas an Earnings ESP of 0.00%. This is because both Most Accurate estimate and Zacks Consensus Estimate stand at a loss of 51 cents.
Avis Budget Group, Inc. Price and EPS Surprise
Zacks Rank : Avis Budget carries a Zacks Rank #4 (Sell).
As it is we caution against stocks with a Zacks Rank #4 and #5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
American Financial Group, Inc.AFG with an Earnings ESP of +0.73% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .
Adidas AGADDYY has an Earnings ESP of +0.94% and a Zacks Rank #2.
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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 Nasdaq, Inc.