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Hertz Slumps as Q3 Earnings Miss Estimates, Updates View

Shares of Hertz Global Holdings Inc.HTZ fell over 12% yesterday following the company's lower-than-expected top and bottom line results for third-quarter 2015. Results were mainly impacted by foreign currency headwinds.

The company's adjusted earnings of 49 cents per share rose 11% from the year-ago quarter earnings of 44 cents but missed the Zacks Consensus Estimate of 53 cents. On a reported basis, Hertz Global posted earnings per share of 52 cents compared with 32 cents reported in the prior-year quarter.

Hertz Global Holdings Inc. (HTZ) - Quarterly EPS | FindTheCompany

Net revenue dipped nearly 5% year over year to $2,976 million due to lower U.S. and International car rental revenues as well as worldwide equipment rental revenue. The top line also fell short of the Zacks Consensus Estimate of $3,034 million. Excluding currency effects, net revenue was flat year over year.

Segment Performance

Revenues for the U.S. Car Rental segment declined 2% year over year to $1,739 million due to flat transaction days and a 2% fall in Total Revenue per Transaction Day (RPD). The decline in total RPD was due to increased on-airport competitive published-pricing environment and lower year-over-year commercial demand. During the quarter, the company renewed its U.S. Car Rental fleet, resulting in a 3% rise in fleet efficiency.

Quarterly revenues for the International Car Rental segment came in at $687 million, reflecting a year-over-year decline of 14%, mainly owing to negative impact of foreign currency. Excluding currency impact, revenue rose 3% attributed to a 1% increase in transaction days that benefited from enhanced business mix in U.S. source rentals, particularly in the European market. Total RPD for the segment, excluding currency impact, rose 2% year over year.

Revenue for the Worldwide Equipment Rental segment slipped 3% year over year to $401 million, while rising 1% on a currency-neutral basis. Results benefited from a 3% rise in worldwide equipment rental volumes, offset by continued weakness in upstream oil and gas markets. Volume growth resulted from enhanced new store growth, while pricing remained flat year over year.

During the quarter, revenues from the All Other Operations segment rose 3% from the prior-year period to $149 million.

Other Developments

During the quarter, Hertz started buying back shares under its $1 billion share repurchase program. Accordingly, the company repurchased 14.8 million shares in the quarter, valued at $17.69 per share or a total of $262 million. The repurchase was funded using available cash on hand and $100 million proceeds from the sale of a portion of its ownership stake in CAR Inc. (China Auto Rental).

Going forward, the company remains keen on buying back shares related to its previously announced leverage target for year-end 2016. The company expects to fund these repurchases with cash from operations and other actions related to the recent sale of Hertz Equipment Rental Corporation's ("HERC") operations in France and Spain to LOXAM Group.

Financial Update

This Zacks Rank #3 (Hold) company ended the third quarter with cash and cash equivalents of $509 million, total debt of $16,609 million and shareholders' equity of $2,338 million.

Outlook

Following the third-quarter results, Hertz reaffirmed its 2015 adjusted EBITDA guidance for the Hertz Global business as well as the Worldwide Equipment Rental segment. This largest general use car rental company expects corporate EBITDA for the Hertz Global business in the range of $1,450-$1,550 million. For the Worldwide Equipment Rental segment, corporate EBITDA is projected to be in the range of $575-$625 million.

However, the company trimmed its Domestic RAC depreciation per unit per month estimate to a range of $270-$280, and U.S. RAC fleet capacity growth to range between 1% and flat year over year. Net non-fleet capital expenditure for 2015 is now expected to be in the range of $220-$240 million.

Stocks to Consider

Some better-ranked stocks in the business services industry are ExamWorks Group Inc. EXAM , Rentrak Corporation RENT and Core-Mark Holding Company Inc. CORE , all carrying 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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