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Hertz Outlines Long-Term Plan & 2016 View at Investor Day

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Hertz Global Holdings Inc.HTZ , which is on track for the planned separation of its equipment rental business by mid-2016, yesterday outlined its stand-alone business plans at an investor meet in New York, addressing more than 200 investors and financial analysts. Additionally, the company initiated its preliminary 2016 guidance, which adds color to the near-term picture. Shares of this leading car rental company rose about 6% after the announcement.

At the meet, Hertz revealed to investors that it is working toward achieving the full potential of its car rental business through planned investments and initiatives. These initiatives include growing with technology, leading in cost and quality, and attracting customer loyalty while delivering top-line growth.

Further, following the completion of its financial restatement in Jul 2015, the company is positioned to grow through enhanced execution while ensuring utmost vigilance. The company has been taking its growth plans ahead as evident from the completion of system integration for Dollar and Thrifty brands in third-quarter 2015 and the appointment of senior management executives for Hertz Equipment Rental business (HERC) as it prepares for its separation next year. Also, it moved its corporate headquarters to Estero, FL, earlier this month.

Coming to the company's long-term plans, Hertz targets adjusted corporate EBITDA margin, excluding its equipment rental business, in the range of 16%-18% over the next 3-5 years. Meanwhile, the company expects adjusted corporate EBITDA margin of nearly 10% in 2015, up from 7% growth registered in 2014.

Additionally, the company expects annual investments of about $100 million in the 2016-2018 timeframe, directed toward development of new technology platforms and systems, enhancing customer experience and accelerating growth at its four car rental brands including Hertz, Dollar, Thrifty and Firefly. Also, it expects to achieve additional $250 million in cost savings for 2016 on top of the already planned $300 million cost reduction target.

Going into 2016, the company plans to rollout distinct positions for each of its rental car brands. Further, throwing light on its 2016 guidance, the company revealed that it expects adjusted corporate EBITDA, on a consolidated basis, to be $1,700-$1,800 million. On a stand-alone basis, adjusted corporate EBITDA for Hertz Global is projected in the range of $1,075-$1,125 million, while for HERC the same is expected to be $625-$675 million.

U.S. car rental revenue growth for 2016 is anticipated to be 2.5%-3.5%, while the overall U.S. car rental industry is expected to grow about 2.7%. Further, Hertz targets consolidated non-fleet capital expenditure for 2016 in the range of $250-$275 million.

While the company's investment plans directed at driving its car rental business to its full potential are impressive, the success of these plans depends largely on smooth execution. Hertz currently holds a Zacks Rank #4 (Sell).

Stocks to Consider

Some better-ranked stocks in the business services industry are Rentrak Corporation RENT , SPS Commerce Inc. SPSC and Vectrus Inc. VEC . While Rentrak and SPS Commerce sport a Zacks Rank #1 (Strong Buy), Vectrus holds a Zacks Rank #2 (Buy).

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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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