Avis Budget Beats Estimates (CAR) (DTG) (HTZ) (R)

Zacks

Avis Budget Group Inc. (CAR) posted third-quarter 2011 net income of $82.0 million, compared with a net income of $90.0 million in the year-ago period. Excluding extraordinary items, quarterly net income came in at $129 million or $1.02 a share.

Net income per share for the quarter beats the Zacks Consensus Estimate of 99 cents and was a considerable improvement from the prior-year quarter income of 78 cents a share.

The company reported a 7.0% jump in net revenues to $1,623.0 million from $1,512.0 million in the year-ago period. Total revenue outpaced the Zacks Consensus Estimate of $1,594.0 million. The year-over-year increase was mainly attributable to a 5.0% rise in volume. Ancillary revenues’ growth of 12.0% also contributed to the revenue increase.

By segment, domestic car rental revenue rose 6.0% to $1,193.0 million in the quarter primarily attributable to a 5.0% volume expansion and a growth of 7.0% in ancillary revenues. This was partially offset by 1.0% fall in pricing. International car rental revenue came in at $318.0 million, grew sharply by 16.0% while truck rental inched up 1.0% to $112.0 million, both on a year-over-year basis.

The company’s adjusted EBITDA increased 27.7% to $272.0 million from $213.0 million reported in the year-ago period. EBITDA margin expanded 230 basis points attributable to lower fleet and financing cost and incremental savings from cost-saving initiatives.

Avis Budget’s total expenses rose 8.7% to $1,487.0 million from $1,368.0 million in the year-ago quarter. Consequently, the company reported income before income taxes of $136.0 million compared with $144.0 million in the year-ago quarter.

The company ended the quarter with cash and cash equivalents of $1,002.0 million and total debt of $2,498.0 million. Net cash provided by operating activities came in at $1,272.0 million while free cash flow for the period came in at $554.0 million.

Avis Budget expects domestic vehicle depreciation costs to fall by approximately 20.0% on a per unit basis in 2011 compared with 2010 and in the range of 3%-5% in fourth-quarter 2011. The company is also anticipating an increase in the domestic volume in the range of 4.0%-6.0% in fourth-quarter 2011.

The company is continuing with its efforts to reduce costs while enhancing productivity through its Performance Excellence initiative and five-point cost-reduction and efficiency improvement plan. The company expects its cost-saving initiatives to provide an incremental $65.0 million of year-over-year savings in 2011. Total annual savings from these initiatives are expected to be $575.0 million in 2011.

Avis Budget Group is the leading general-use vehicle rental company in North America, Australia and New Zealand. Moreover, a formidable network of more than 10,000 rental locations and 350,000 vehicles enable the company to strengthen its well-established position in a highly competitive vehicle rental industry.

The company faces intense competition from other established players, such as Hertz Global Holdings Inc. (HTZ), Enterprise Rent-A-Car, Dollar Thrifty Automotive Group Inc. (DTG) and Ryder System Inc. (R).

Avis Budget maintains a Zacks #3 Rank, which translates into a short-term Hold recommendation. Our long recommendation on the stock is Outperform.

AVIS BUDGET GRP (CAR): Free Stock Analysis Report

DOLLAR THRIFTY (DTG): Free Stock Analysis Report

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RYDER SYS (R): Free Stock Analysis Report

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