Shares of Avis Budget Group, Inc. (CAR) surged 12.2% since it came out with fourth quarter and fiscal 2013 results on Feb 19, 2014. The momentum gathered from the robust earnings led the stock to hit a new 52-week high of $44.89 on the last trading day. It eventually closed at $44.88, amassing a significantly high return of 98.8% over the past one year.
The company posted better-than-expected fourth-quarter and fiscal 2013 results, mainly on the back of synergies realized from its long-term strategic plans. Results for both periods benefited from strong volume growth and pricing that stemmed from continued investments in the company’s highly profitable customer segments and channels.
Fourth-quarter 2013 adjusted earnings per share of 15 cents surpassed the Zacks Consensus Estimate of 12 cents and reflected a significant improvement from a loss of 7 cents per share reported in the prior-year quarter. Avis Budget’s net revenue increased 8.9% year over year to $1,849 million in the fourth quarter and surpassed the Zacks Consensus Estimate of $1,833 million. Top and bottom lines were aided by strong contributions from recent acquisitions including Zipcar and Payless Car Rental.
Other than this, the recent momentum in the stock was mainly driven by a rebound in leisure and business travels owing to recovery in the U.S. economy and increased spending by individuals. Furthermore, while the company is growing due to an uptick in travel demand, the integration of its Avis Europe and Apex Car Rentals businesses is progressing well too.
Apart from recent positive industry trends, we believe that the company’s record of beating quarterly earnings expectations and sustained focus on increasing its global footprint make the stock an attractive option for investors. With respect to earnings surprises, this Zacks Rank #2 (Buy) company has posted positive surprises in 4 of the last 5 quarters with an average beat of 27.1%. The company’s long-term EPS growth rate is 14.9%, above the peer group average of 14.3%.
Additionally, the company is focused on enhancing its operational efficiency, as is evident from its recent launch of a used car sales program “Avis Direct”, with a dedicated website for automobile dealers. The new program will allow dealers to purchase from a wide variety of late-model off-rental vehicles across the company’s Avis, Budget, Payless and Zipcar rental locations in the United States, free of any enrollment or purchase fee.
This leading car rental company currently trades at a forward P/E of 16.6x, in line with its peer group average. Its last traded price is 15.7% above the Zacks Consensus average analyst price target of $38.80. Average volume of shares traded over the last 3 months stands at approximately 1,757.1K.
Apart from Avis Budget, CBS Corporation (CBS), Post Holdings, Inc. (POST) and Aon plc (AON) also hit 52-week highs of $66.60, $57.54 and $86.45, respectively, on Feb 21, 2014.
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