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Can Avis' Strategies Help it Tide Over the Currency Turmoil?

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Avis Budget Group Inc.CAR , a leading vehicle rental service provider, has been gaining value from its expansion strategies, which are progressing in full swing via alliances, acquisitions and joint ventures. Also, the company remains focused on fortifying its fleet with the addition of latest car models from leading manufactures in order to attract customers. We believe that these strategies along with better customer support systems, position the company for top-line growth.

We also commend Avis' focus on expanding its Budget brand, taking its multi-brand strategy to the next level by acquiring its Budget Car Rental licensees at various locations. Moreover, sustained productivity growth, implementation of pricing initiatives and potential revenue-generating synergies from various acquisitions bode well.

Some of the recent ventures to expand globally include Avis' multiyear preferred partnership deal with JetBlue Airways and Southwest Airlines; becoming the Official Rental Partner of Pebble Beach Resorts; expansion of Zipcar to Wilmington and Ottawa; strengthening its Asian footprint; and acquisition of Italy-based Maggiore. Apart from this, the company has acquired its Budget licensees in Brazil, Southern Africa, Southern California and Las Vegas in the U.S., Norway, Sweden and Denmark in Scandinavia; and Edmonton in Alberta, Canada.

Further, we see strong U.S. demand trends for Avis Budget as travel volumes continue to be on the rise. Envisioning strong travel trends among leisure and commercial travelers as well as sustained expansion of these trends, we believe the acquisition of the renowned Maggiore and purchase of other licensees will enhance Avis Budget's operational foothold in global markets.

However, the company is facing a downturn in its revenues due to negative impacts from the ongoing currency headwinds. This was evident from the company's second-quarter 2015 results, wherein Avis posted better-than-expected earnings but the top line disappointed. Moreover, the company lowered its revenue, adjusted EBITDA and earnings forecast for 2015 as it expects the unfavorable currency environment to continue hampering results. This has triggered a downtrend in estimates.

Additionally, the company continues to face macroeconomic headwinds and industry over-fleeting, particularly in its International segment. Also, pricing remained challenging during the second quarter of 2015.

Nevertheless, Avis has been persistently implementing its disciplined pricing initiatives and expects these to offset the rising fleet costs. Though the company noted an improvement in pricing comparisons in the Americas by the end of the second quarter and anticipates this pattern to continue in the second half of 2015, we would wait for more pronounced results on this front before turning optimistic.

Avis Budget currently holds a Zacks Rank #3 (Hold).

Zacks Rank

Some better-ranked stocks in the business services industry include Core-Mark Holding Company Inc. CORE , Liberty Tax Inc. TAX and RPX Corporation RPXC , each with a Zacks Rank #2 (Buy).

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AVIS BUDGET GRP (CAR): Free Stock Analysis Report

CORE-MARK HLDG (CORE): Free Stock Analysis Report

LIBERTY TAX INC (TAX): Free Stock Analysis Report

RPX CORP (RPXC): Free Stock Analysis Report

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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.


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

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